Itasca-Mantrap rates to increase
Itasca-Mantrap customers will see an increase in their electricity rates in April brought on by rising wholesale costs.
"The 2010 and 2011 wholesale cost of power increase will add $790,973 to our operating costs," wrote CEO Michael Monsrud in the February Member newsletter.
"The board just confirmed the rate increase at last month's board meeting," said Member Services Manager Jared Echternach.
"What the board approved is for the residential basic charge, which is currently $26 per month, to go to $28 per month," Echternach said.
That cost of service is what it costs the co-op to provide electricity to each residence, including "the cost of poles, wire, equipment, vehicles, tree trimming, billing, etc.," Monsrud wrote. "The basic charge is the cost just to make service available." Metropolitan areas have roughly 48 customers per mile. Itasca-Mantrap has only 5.8 customers per mile to recover the $20,000 cost to build a mile of "single-phase line." That leaves a fairly substantial gap in revenue for fixed costs, which the basic charges to rural residents then help defray.
The current $6.32 monthly heating service charge "will not be implemented," Echternach added. "Rather it will be collected in the energy rate itself."
That means the more kilowatts customers use, the more it will cost them, generally an average of around $5 per month.
"Residential, in summer months June July and August will be 10.83 cents a kilowatt-hour (kWh)," Echternach said.
Summer rates are higher because that's when the lines are taxed the most. At recent power line hearings, company officials said the Mantrap substation is frequently overloaded by as much as 35 percent in the summer peak season.
"For the remainder of the months it will be 9.43 cents a kilowatt-hour so it's a little higher in the summer," Echternach said. "Currently it's 10.4 cents in the summer months and 9 cents a kilowatt-hour."
So a "middle range" customer who uses 750 kWh would be billed 99.93 today.
"Under the new rate it would be $105.51, so roughly a $6 per month difference and $2 of that is the monthly basic charge," Echternach said.
"The seasonal rates would be $111.15 cents to $116.73," for that same middle range user, he said.
Wholesale costs are about two-thirds of Itasca-Mantrap's expenses, the company maintains.
"The rest is on the distribution side of the operation so roughly 35 percent of the cost we have control over, like our distribution expense, our lines, transformers and substations, billing and accounting system, the facility," Echternach said.
Tho wholesale costs of power have been rising steadily since late 2009, Monsrud's letter stated. And a state mandate to obtain 25 percent of all power from renewable sources by 2025 is already adding to the costs of wholesale power. Since 2007, electrical co-ops have been under Legislative pressure to buy more renewable sources of energy.
Great River Energy, Itasca-Mantrap's supplier, has been investing in wind farms. And even though Itasca-Mantrap could buy cheaper power on an open market, that would be skirting the mandate, so that power must come from wind turbines at a higher price.
It could be worse. Wind power comes with a federal tax subsidy. And peddling wind energy on the open market can be as volatile as trading in the commodities futures market.
"Since the wind tends to blow at night when it's not all that useful, cooperatives have had to sell much of their wind energy on the open market," said Mark Glaess, manager of the Minnesota Rural Electric Association.
"Sometimes there was absolutely no market for the wind and then one utility had to pay another utility to take those renewable kWh off their hands."
Great River Energy is starting a 115 kV line that will snake through part of Hubbard County near Potato Lake, linking to a new substation on Highway 71 north of Park Rapids.
Echternach said to date those costs have not been realized, but both GRE and Itasca-Mantrap will eventually pass the cost of the lines and the new substation on to customers.