BPU: Rate set to entice new businesses
Businesses interested in coming to Brainerd may be able to save some money on electricity, thanks to a new development at Brainerd Public Utilities. Tuesday, the BPU Commission approved a new economic development rate which gives large electricit...
Businesses interested in coming to Brainerd may be able to save some money on electricity, thanks to a new development at Brainerd Public Utilities.
Tuesday, the BPU Commission approved a new economic development rate which gives large electricity users a rate discount during their first five years as BPU customers.
Todd Wicklund, secretary/finance director for BPU, said the commission had previously asked about an economic development rate. He asked Utility Financial Solutions, which advises BPU on its rates, to develop some options for an economic development rate.
"A lot of utilities, municipal utilities, do have some kind of rate to attract new business to the city," Wicklund said.
The rate applies to customers in two service classes: general service demand and large light and power. The utility currently has 491 general service demand customers and 31 large light and power customers.
The discount provided to these large-use customers doesn't mean customers in other service classes will pay more, Wicklund said. The costs of providing the discount are divided out among other customers in their rate classification.
"The residential ones should not be subsidizing the difference," Wicklund said.
Wicklund said Utility Financial Solutions recommended a declining discount scale option, which is most commonly used. The commission unanimously approved a motion approving the recommendation.
Over the course of five years, general service demand customers will save an average of 13 percent on their electricity costs. During the same period, large light and power customers will save an average of 9 percent on their electricity costs.
"This is not new ground for utilities," Wicklund said.
GS Demand LLP
Year - Discount (%) - Discount (%)
1 - 21 - 13
2 - 17 - 11
3 - 13 - 9
4 - 9 - 7
5 - 5 - 5
The discounted rate still benefits BPU in that it can bring in new customers to add to its current electricity load, Wicklund said, which helps the utility's load factor.
Without the new rate, BPU's rates for general service demand and large light and power customers are higher than Minnesota Power's and lower than Crow Wing Power's, Wicklund said. But with the economic development rate, a general service demand customer could save up to $5,000 per month on their electric bill.
The new rates could apply to any type of business, Wicklund said. As long as the business uses enough electricity to be considered a general service demand or large light and power customer, it would qualify for the economic development rate.
"It could be any type of thing that could fit," Wicklund said.
Most importantly, the rate serves as an economic development tool, Wicklund said. It could help development at the Brainerd Industrial Park and with general redevelopment, he said. New businesses are checking utility prices and an economic development rate could be the thing to sway a business to come to Brainerd.
"Hopefully increase the tax base, employment, a whole lot of other benefits," Wicklund said. "This is one way a utility can help."
Commission President Mark O'Day asked which businesses would qualify for this new rate. Mann Lake is moving into the Brainerd Industrial Center and while it's not a new business, it would be new to Brainerd. "Where is that line?" O'Day asked.
Wicklund said it's up to the commission to determine what businesses would qualify for the new rate. O'Day said he'd consider opening up the window to businesses started in the past three years and inserting them in the third year of the discount schedule.
"If they're a new business, we want to keep them and we're offering this," O'Day said. "They're going to say, 'Well I never got that.'"
There's a wide variety of economic development incentives available to businesses from a plethora of organizations, O'Day said. The economic development rate is the utility's way to help with economic development in the area.
"This is what we can afford to offer," O'Day said.
After discussion, the commission determined the economic development rate would take effect for new businesses started after Tuesday. But Wicklund will also look at how many general service demand and large light and power customers have started in the past five years and would qualify for the rate. He said it would be easy to identify the handful of candidates who might qualify.
"You hate to have the guy who's gone through a lot of work and is maybe not fully up and running, but has been running for two months," Wicklund said. "You don't necessarily want to exclude them."
Commissioner Lucy Nesheim said it's important to give a boost to new businesses in their first few years, because many new businesses don't make it past the first few years.
"That's when they need the help the most," Nesheim said.
Nesheim said information on the rate should be passed on to the Brainerd Lakes Area Economic Development Corporation immediately, so they can inform any potential businesses they speak with about the rate.