Local cities paying price for Nebraska ice storm
A December ice storm that ripped through Nebraska destroying 824 miles of transmission lines will cost local cities big bucks.
Moorhead Public Service Director Bill Schwandt said the city received notice from Sioux Falls, S.D.-based Missouri River Energy Services that costs to purchase power will increase as a result of storms that affected power plant production in Laramie, Wyo.
The company expects the estimated cost of the outage to total $23 million. Sixty communities in Iowa, Minnesota, North Dakota and South Dakota will now pay more for power.
The city will buy power from other sources on the energy market while the plant is down, Schwandt said.
"They've cut our power back to about 50 percent of what comes out of that plant," Schwandt said.
"We're paying dearly for it."
Lines from the Nebraska storm are expected to be down until summer. With power at the plant not up to 100 percent until then, Schwandt said the city estimates a $2.3 million bill for pricier power costs.
That means MPS will drain its reserves to pay for the unexpected costs and utility rates will go up, he said.
Schwandt said the city's Public Service Commission will discuss how to pay for the expenses in coming weeks.
Other cities are in a similar boat.
"It's going to affect us but it's pretty hard to put a dollar figure on it yet," said Detroit Lakes Public Utilities Superintendent Curt Punt.
"I would guess that we would probably have to raise our rates because of this in 2008, but it's a little bit early to guess at what type of percentage."
For many local cities, it could be the second rate hike residents will see in a year.
For example, in November Moorhead Public Service's customers received notice by letter utility rates for 2007 will see an 8 percent increase for electric rates and a 5 percent increase for water in 2007. On average that translates to an increase of $5.05 per month for electricity and $1.26 more each month for water.
Several reasons were cited for that increase including higher expenditures for power supply purchases from Missouri River Energy Services.
The company, which supplies about 47 percent of Moorhead's electric energy, already increased rates by 8.5 percent for 2007.
MRES in 2007 will pay an estimated $7 million more than in 2006 to ship coal to its coal-fired power plant, and Moorhead must foot $700,000 of that bill.
MRES is also investing in wind turbines, natural gas turbines and participation in the proposed Big Stone II coal fired power plant near Milbank, S.D., to accommodate membership growth.
Those factors influence cost for Moorhead utility customers, and other cities that own their own public utilities.
Guy Swenson, a telephone, electric and cable coordinator for Barnesville, Minn., said Barnesville utility customers haven't adjusted to a previous rate increase yet.
"We just raised our rates because of the increase in Missouri River because of the drought and the rail increase costs for getting coal to the power plant," Swenson said.
"The new rates don't go into effect until mid-March and now they're going to increase us again because of the ice storm."
Schwandt said cities plan for natural disasters through reserves but must wager that nothing major happens in the near future until a new cushion is built.
"We have reserves. We did plan on something like this happening. But it's probably only once every 30 years that it does," Schwandt said.
"One concern is what if something else happens now that our reserves are down? That would be a tough situation."