HIBBING— When it comes to the Hibbing Public Utilities, many questions abound throughout the community. Will the steam system be around ten years from now, or will everyone convert to natural gas? What will happen to jobs? What about rates?
On Monday afternoon, the HPU’s general manager, Scott Hautala, and the director of finance, Jean Lane, sat down with the Hibbing Daily Tribune for a candid discussion to dispel rumors and try and paint a clearer picture of the current state of the utility. The following are excerpts from that conversation and have been lightly edited for content and clarity.
What do you feel is the biggest misconception in the community about HPU?
Hautala: There’s a fair bit of misconception on what Hibbing Public Utilities is going to do with their steam system. Some people are making statements that we’re ending it this year and there’s nothing further from the truth. We learned from the Attorney General that as a statutory city, we need the vote of the citizens and we were not successful in getting our legislative change to not require going to a vote to reduce or eliminate a utility.
So, right now three things would have to happen: the commission would have to approve the plan, the city council would have to approve the plan and it’d have to go to a referendum.
What does a referendum entail?
Hautala: A referendum is asking the citizens of Hibbing, ‘What do you want to do with your steam system?’ We’ll get some options during the June 27 working session. We have to work with the [HPU] commission if they would even support a referendum.
If we get to a point where we can eliminate a portion of or all of steam there will still be a time frame to do it. What’s being discussed at a commission level is a three to four year period once they’ve made a decision. We’re not going to eliminate something in six months and leave people to scramble. And the commission and city council have not made a decision.
What is the second biggest misconception about HPU?
Hautala: There hasn’t been a loan program approved yet. We’re trying to schedule a working session with the city to gauge their opinions on the plan.
Lane: Another misconception is the time and energy it takes to move an organization in a new direction. To look for and gain efficiencies takes time; it’s a very methodical and thought-out process in which the governing body goes through different options. Putting the customer in the center, those decisions take longer as we gain more information and give that information to the commission. It’s hard to have patience both internally and externally to see the results but they’re coming.
What is your view of the steam system?
Hautala: The recommendation that has been made is that our system is too large to repair. We’re never going to get to the south end to do a steam line to make it better on the distribution side or get more condensate back— that’s from the HDR report. It’s too expensive to replace our steam system to make it state of the art. In certain areas we have more losses than we have sales. If we’re burning more fuel than what we’re getting a benefit of by the customers buying it, it would make economic sense for those customers to be on another utility. There is another utility that is economic; its revenues are more than its cost— and that’s gas.
Do you know what the average utility bill is?
Lane: We’re not there yet, but we’re moving in that direction. Hibbing has a unique situation in that not everyone receives or is able to receive the same services. We have individuals who may receive gas services from the city but electric services from one of the two other companies. Some may receive just gas and water. It’s not contiguous, not the same, in that not everyone has access to all the services. That makes it more difficult. We’ve got to pull them all apart and look at the services provided as separate services so that then we can answer. We will know. We have a better understanding now because we’re focused on it.
What are your biggest costs?
Lane: On the expense side, the main cost is fuel. Whether it’s buying electricity from [Minnesota Power] and turning around and distributing it, or producing steam or buying gas and distributing it, fuel is our largest cost. The second largest cost is in the personnel area and that makes sense.
There was a request to form sub-committees of the commission. With the rates, we want to focus on efficiency. You’re going to hear that word a lot — efficiency — because that will end up connecting to rates.
What can you say about rates and how do you see utility costs changing over the next five years?
Hautala: [Rates] are driven by costs. Our rates are only covering our cost with only a little additional dollars so we can refund and reinvest in each utility.
Starting September 1, we will be with a new gas vendor and will be recommending the commission approve more gas purchased to buy into a lower cost gas. A lot of our hedge gas ends 2021, so we have the ability to take advantage of some lower priced gas that should be able to decrease our future gas rates.
Right now we don’t have an off-peak rate. You need your [automated meter reading] to tell your meter to either start or stop, so you need [automated meter reading] to report to have an off-peak rate. Same thing with water heating and air conditioning, if we have that out there whoever wants to sign up can possibly have a reduced rate. That would reduce our electric purchasing cost.
Lane: It’s all intertwined. Rates may go up, they may stabilize or decrease. It depends. But what we’re trying to do is offer customers more choice and control of utilities in their own home or business.
Hautala: When we did generate [electricity] with steam going out to our district through this bridge agreement with [Minnesota Power], it did offset our costs a bit, but it ends June 30. There’s a lot of work going into negotiating our next contract. We’ve been meeting every month since July of last year.
What are your thoughts on the current HPU commission?
Hautala: The new commissioners — and old commissioners — I would characterize as a learning commission. They’re asking the questions and trying to get the best information to make decisions they need to make. We need to be constantly flexible and not just say ‘this is how it’s going to be’ because we have to keep in mind real life changes. Better information is going to have better results.
Lane: As far as our governing body, we’re at an extremely critical time and I think those selected by the city council will do exactly what they need to do. I do believe the previous commission got us to the point we’re at now and each time you have members change, you have a different governing body but each one has made their impact.