This month I have to write about that most dreaded issue in our business, an increase in your electric rates. After completing our budget for 2004, it was obvious that our projected revenue would not be sufficient. We are now planning to revise rates upward effective with the April, 2004, billing period. This will be the first increase in our General Service Rate since 1993.
Normally, electric rate increases are necessary because operating expenses are on the rise. That is not the case for us. In fact, our projected increase in operating expenses is less than $200,000 for 2004. Since we sell over $35 million in electricity, we could easily absorb an additional $200,000 without increasing rates. In fact, with growth of around 2%, which has been typical in recent years, we would feel no pain with this level of increased operating expense.
The reason we need an increase in our rates is because our wholesale power rates from Minnkota Power Cooperative are scheduled to increase in April. Minnkota is forecasting a wholesale increase of 8.4% at that time. On an annual basis, this will increase our wholesale cost of power by about $1.8 million. At this point, it looks like we will need to increase our retail by about 5% to cover the increase in our wholesale cost. The exact amount of increase will be known by the time the next issue of the Nodak Neighbor is sent out.
As I stated above, this is an increase we dread to report. On the other hand, we are happy we have not needed to do this on an annual basis. When we compare this increase to the cost of many other things we purchase, we will find that not many are only 5% higher than 11 years ago. The increase we will see in our wholesale power bill from Minnkota is not the first in recent years. Our wholesale power cost increased by 8.5% in 2002 and 4.5% last year. With the additional increase next April, our wholesale power cost will be $4.5 million higher than three years earlier. Only because of cost cutting measures, our recent merger, and consistent growth in our system have we been able to avoid significant rate increases during the past two years.
For those of you who heat with off-peak electricity, you will be quick and just to point out that you have seen increases in your Off-Peak Rate during this period. We, in fact, added a $2.00 monthly facility charge and increased the Off-Peak Rate from 2.9Â¢ to 3.1Â¢ over the last two years. For someone using 15,000 kilowatt-hours to heat their home, these two increases added $54.00 to your annual heating bill. Again, we didn’t like to increase the cost of heating for our off-peak customers, but the amount of increase pales in comparison to the increase many homeowners have experienced with other heating fuels.
On April 17, we will be holding our annual meeting at the Alerus Center in Grand Forks. We will be prepared to talk about our retail rates, our load management program, and any other issues you want to bring up. We encourage you to attend your annual meeting, as it is an opportunity for you to participate as a member/owner of the cooperative.