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SWL&P seeks rate hike following refinery fire

Damage done to tanks at the Husky Energy oil refinery during a series of explosions and fires at the refinery April 26 can be seen Sunday from Stinson Avenue. Superior Water, Light & Power is seeking a rate increase to offset the loss of business from the refinery, which is in the midst of recovery efforts. Jed Carlson/jcarlson@superiortelegram.com

MADISON — Superior Water, Light & Power's loss of net income due to the explosion at the Husky Energy refinery in April is being factored into a rate request the utility filed last week with the Public Service Commission.

The utility is seeking rate increases of 2.01 percent for electric, 2.31 percent for natural gas and 8.26 percent for water, according to the testimony of Joscelyn A. Skandel, SWL&P's rate supervisor, filed with the PSC.

Average residential customers currently pay $54.25 monthly for approximately 3,000 gallons of water, including the public fire protection charge. An average residential customer pays $95.10 monthly during non-summer months when using 100 therms of natural gas and $72.63 monthly for 592 kilowatt hours of electricity, according to the PSC.

It typically takes the PSC several months to analyze rate requests, hold a public hearing and issue new rates.

In documents filed May 25, the utility doesn't refer to Husky by name, but calls the company, "its largest water customer and second-largest electric customer."

It further states that the company "will not operate for an extend period of time due to an explosion and ensuing fire at their location in April."

SWL&P expects Husky to operate in the near future, but in the meanwhile, it must calculate the interim loss of revenue, which the utility expects to be lower in 2018 and "significantly lower electric and water revenues in 2019," according to Skandel's testimony.

The utility estimates net operating electric revenue to decrease by 13 percent — from $2.73 million to $2.36 million — between 2017 and 2019.

During the same time period, estimated net operating water revenue is expected to tumble 14 percent from $2.43 million to $2.1 million, while estimated net operating gas income would be practically unchanged from approximately $900,000 to $897,000, according to testimony from Paul Holt, the utility's treasurer.

Only weeks separated the refinery explosion and the utility's rate filing, so Holt expects the financial numbers to change during the several months of the rate-making process and being adjusted accordingly.

In a phone interview this week, Holt said the temporary loss of Husky wasn't the main reason the utility filed a rate case. Instead, it is the ongoing investment in infrastructure to "improve safety and reliability."

The utility is replacing its conventional meters with an advanced metering system and will have all electric meters converted by the end of the year, Holt said. New gas and water meters are being phased in by 2019.

The utility will spend $2.1 million this year and $1.8 million next year on the project, Holt said.

The utility is building a new power line and electrical substation between the Enbridge Energy terminal and the Husky refinery at an estimated cost to the utility of $10.6 million. The refinery explosion has delayed the project one month, but as of this week, Holt expects the work to resume and the line to be completed by the end of the year.

The utility is also replacing water mains along Belknap Street and smaller mains along Belknap's side streets during a major street reconstruction project. In its second year, the utility expects to spend $2 million to replace its services.

While the utility routinely replaces water mains, meters and upgrades electric facilities, Holt acknowledged that even a temporary loss of a major customer like Husky is a rare event and impacts the utility's bottom line.

"A lot of our costs are fixed," Holt said, explaining that while certain operating costs will decrease due to the refinery's shutdown, the utility needs the revenue to recover for its ongoing expenses and debt service, whether certain customers are in operation or not.

The PSC allows major investor-owned utilities to seek new rates every two years. The PSC last granted the utility rate increases in August. At that time, electric rates increased 3.8 percent and water 9.75 percent, while gas decreased 9.6 percent, according to a SWL&P news release.

The company plans to announce the rate requests in August, after PSC has reviewed the rate application, proposed new rates and scheduled a public hearing. Holt anticipated the PSC will set new rates to take effect "sometime in 2019."

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