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DETROIT LAKES — The Detroit Lakes Public Utility rates for water and electric services will be increasing in 2023.
After receiving unanimous approval by the Detroit Lakes City Council during their Nov. 7 meeting, the water rates for an average city utility customer will increase about 6.5% next year and the electric rate will rise an additional 3%, according to a report presented by Vernell Roberts, general manager for Detroit Lakes Public Utilities, during the meeting.
The average customer should see an increase of about $3.53 in their total monthly utility bills, according to the utility rate report.
"That's about what an 18-pack of eggs has gone up in the last year," said Roberts. "We still bring a lot of value for three-and-a-half bucks more a month."
The rate increase recommendations that were approved by the city council were the result of a cost of service and rate study conducted by Missouri River Energy Services (MRES). The study aimed to "review existing rates and future proposed capital costs" to ensure the city's public utility funds have enough money to cover upcoming projects over the next four years, according to a memo accompanying the rate increase proposal.
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"So we took all the capital costs, our operating costs, everything our crystal ball told us for the next four years and plugged those numbers in and that tells us what we need to do for rates," said Roberts.
A new 1.5-million-gallon water tower will replace Detroit Lakes' current tower in coming years and the new rates also account for increased utility construction included in new residential and commercial developments, the memo stated.
"That big tower is 8.3 million bucks," he said. "So you have to figure out how you are going to do debt service on that and how you are going to fund that."
Additionally, the Detroit Lakes Public Utilities Commission has also incorporated into the new utility rate structure the funds needed to pay for water main replacements included in upcoming reconstruction projects over the next five years. These water main replacements were typically assessed to property owners, but, if Detroit Lakes changes its special assessment policy in coming months, those replacement costs would be spread out across the utility's customer base instead.
On the electric side, the Western Area Power Administration (WAPA), of which MRES is a member, will be increasing their electricity rates substantially for 2023, up about 16.4%. WAPA's rate increase was due to the 2021 polar vortex and ongoing drought conditions throughout their service area, the memo stated. However, Roberts said, MRES only purchases about 35% of its power from WAPA, so the effects of their rate increase should be minimal.
"That's also our cheapest cost of power," he said. "So, while 16.4% is a big percentage number, the dollar amount is about $270,000 ... but 16% of a dollar is less than 16% of $100 million, it's still 16%, but we just need to keep it in perspective."
Roberts added, over the next four years, the Detroit Lakes Public Utilities is projecting to spend more than $40 million on capital needs, which include: replacing the existing jet turbine generator; increased distribution needs; and additional work on the electric substation located on the south side of the city.
The Detroit Lakes Public Utility commission deferred a 3% electric rate increase to the local customer base in 2018 due to a strong financial position, but that increase will go into effect next year. The memo also stated electric utility rates may see increases in 2024 and 2025, but those rates will be "evaluated annually" to determine a final percentage.
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Detroit Lakes does appear to be in better shape, cost-wise, when compared to other municipalities from around the region and state.
For the average city utility customer using 3,140 gallons of water per month with a 5/8-inch meter, the new monthly water service fee will be $25.41 in 2023, which is lower than both Thief River Falls ($41.27 per month) and Moorhead ($33.02 per month).
For the average Detroit Lakes electric customer using 800 kilowatt-hours per month, the new monthly electric service fee will be $98 per month, which is lower than Lake Region Co-op ($113.80 per month), Wild Rice Co-op ($128.98 per month) and Xcel Energy ($132.09 per month).
