MADISON - River Falls Municipal Utilities residential customers will pay about $10 more per month for electricity if the Public Service Commission approves a rate request the utilities submitted last week.

RFMU's last electric increase was a 4%bump in 2008 and in 2001 before then, according to Kevin Westhuis, utilities director.

"When this rate increase becomes effective next year, our customers will have had only a 4% increase in 20 years," he said Monday.

Average residential customers using 695 kilowatt hours of electricity a month would pay $9.98 under the requested rates while commercial customers using 1,939 kilowatt hours per month would pay $21.99 more, according to Westhuis.

RFMU is following an industry trend of collecting more revenue through the customer charge versus usage fees to recover some of its fixed costs. The utility seeks to increase the $7 monthly charge residential customers currently pay to $13.65.

As electric usage per customer account decreases, utilities still must provide the poles and wires to distribute power whether the customer consumes electricity or not. Utilities have turned to increased customer charges to offset the revenue loss.

Annual electric sales have decreased from $14.09 million in 2015 and are slowly building back, expected to reach $13.9 million this year and $15.2 million next year with the new rates.

Without the new rates, the utility projects a negative net income of $274,691 after revenue of $13.9 million and expenses of $14.1 million. Payments in lieu of taxes and depreciation are the fastest growing expense items contributing to next year's projected income deficit, according to the utilities' financials. However, Westhuis said that when depreciation, a non-cash expense, is excluded from the bottom line, the utility cash flow is positive.

A surge in infrastructure projects totaling $7.2 million in the past three years prompted the rate request, he said.

Among the projects completed or ongoing are:

• $800,000 to replace conventional meters with automated meters to better track customer usage;

• $700,000 to relicense the hydro generators at Junction Falls and Powell Falls, which will be retired in 2026 and 2035-40, respectively,

• $2.3 million to replace obsolete equipment at the substation at 222 Lewis St.;

• $4.2 million to replace a substation at the power plant;

• Adding SCADA communication systems.

The generators at Junction and Powell Falls are producing enough revenue currently to pay for the cost to relicense and decommission them, Westhuis said. The generator at Junction Falls has produced electricity since 1900 and first powered electric lights downtown, he said.

"There's some sentimental value to these (hydro) dams but the goal of the community is to eventually have a free flowing river without impoundments, which will be done in phases," he said.

An engineer was hired after the SCADA (Supervisory Control and Data Acquisition) systems were installed, who also assists with the automated meter installation and other technical projects. A full-time customer service rep also was hired recently.

Utility field staff have begun replacing the electric meters, sometimes up to 70 per day, said Westhuis, and should complete the conversion from conventional meters next year. Then, a component will be added to meter water usage in about two or three years, using contract labor, he said.

RFMU has increased marketing costs to promote energy efficiency which has returned more money from the state's Focus on Energy program for energy management projects.

"This community sent $55,000 to Focus on Energy last year but we received about $170,000 back...Our goal is to get back $2 for every $1 we send out, last year it was 3-to-1," he said.

Replacing two electric substations just a few years apart is uncommon and expensive, said Westhuis, but that was set up by decisions made a few decades ago.

The utility may not get all the revenue it is seeking because the rate application is based on a 5.5% rate of return on the value of its infrastructure investment. The PSC has been authorizing only up to 5.1% return to publicly-owned utilities this year, Westhuis said.

Before new rates are set, PSC staff will review the request, recommend an amount of revenue it deems the utility needs to remain financially viable and hold a public hearing simultaneously in River Falls and Madison on any proposed increase.