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City reviews WAPA rate increase
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By CHUCK CLEMENT, Staff Reporter
| 09/09/2009 |
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Madison City Commissioners reviewed information on Monday that outlined the need for a rate increase to pay for electricity generated from Missouri River dams and distributed by the Western Area Power Administration.
The commissioners are considering a 2010 municipal budget that includes a 10 percent electricity rate increase to Madison residents. The retail rate increase will help the city balance next year's budget.
WAPA currently provides about half of the electricity that Madison's municipal electric utility distributes to its residents and customers. Due to drought conditions on the Upper Great Plains that started in 2000, WAPA was unable to meet its production quotas in providing hydroelectric power to communities and had to purchase electricity on the open market.
As the drought wore on and reservoir levels fell in the three storage dams on the Missouri River, the U.S. Army Corps of Engineers saw hydropower production fall to 60 percent of the typical electricity generation. In purchasing electricity on the open market, WAPA had to borrow millions of dollars.
Recent electricity rate increases by WAPA are part of an effort to pay off about $900 million in loans that WAPA took out from lenders. Jeff Heinemeyer, city finance officer, said that a WAPA official provided information last week which explained the need for a wholesale rate increase for the agency's electricity.
WAPA generates hydropower for the Upper Great Plains from six dams on the Missouri River, but when production fell short, the agency had to purchase electricity at prices as high as 6 cents per kilowatt-hour on the open market. However, until WAPA officially raised its rates, it had to sell the same electricity to its customers, such as Madison, at 2.8 cents per kwh.
"So they've had to go out and borrow a lot of money," Heinemeyer said.
WAPA's rate increase was 13 percent in 2009. The city commissioners said the 2009 increase was added to a 25 percent increase in 2008.
Electricity industry officials have predicted that the price increase in WAPA hydropower will stay in place until at least 2019. Under WAPA's projections, its debt will remain at about $900 million during 2010 and start falling afterward. The agency's debt will keep falling steadily during the next decade, reducing the remaining debt amount to about $300 million in 2015.
The loan repayment schedule is also based on the Missouri River dams having typical water levels in coming years. Heavy spring runoff and beneficial amounts of rainfall during 2009 have increased the Missouri River reservoirs to their average water levels.
Mayor Gene Hexom said the city was fortunate, despite recent rate increases, to have electricity available from the dams, because its cost was cheaper than electricity produced from fossil fuels, nuclear power or other energy sources.
The commissioners held the first reading of the 2010 municipal budget on Monday -- a proposal that will have Madison operate on $18.3 million next year.
The budget also includes a request to the Lake County auditor to levy $1.77 million in property taxes during 2010 on the city's behalf. The city requested $1.4 million in property taxes for general purposes and another $355,000 to pay for general obligation bonds.
Heinemeyer said the city's portion of property taxes amounts to about 20 percent of the total amount assessed. The remaining 80 percent of levied property taxes goes to the public school district and county governments.
Final approval of next year's municipal budget is supposed to occur before the end of September. The second reading of Madison's 2010 budget was scheduled for the Sept. 21 city meeting.
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©Madison Daily Leader 2010
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