Background
Our Buffalo Municipal Utilities (BMU) purchases wholesale power from our 12- member agency Minnesota Municipal Power Agency (MMPA). This includes a diverse generation purchasing portfolio. It also purchases power from other sources within Midcontinent Independent System Operator (MISO) and your utility distributes that power to our BMU customers.
Historically, energy sources have come from coal and natural gas. Due to many coal plants decommissioning or being shut down, natural gas is becoming a primary source for electric generation. Greener energy solutions are growing and improving, but do not have the same consistency when it comes to generating electricity. When a spike or increase happens in the natural gas market it directly impacts the cost wholesale power and increase the Power Cost Adjustment increasing the cost of electric to our customers. Natural gas started the year around $4/MMBtu and spiked to $9/MMBtu. Our price for natural gas last year at this time was $2.5/MMBtu. The increased price of natural gas is a result of higher demand, the impact of the continuing Russia-Ukraine war, and increased exportation costs. Some good news is July has shown prices decreasing to $6 to MMBtu, so this trend is promising.
PCA Increase
As a result of the increased energy price and demand, BMU customers will see a higher than average PCA increase from a typical $.02 to $.04 during this time of year on their next billing which is June usage. The PCA is built to adjust fluctuating power supply costs. There is a slight variability throughout the year as usage varies with our seasons. Hopefully, the trend continues to decrease as the year goes on, but expert forecasters do feel that the rise in natural gas prices will likely continue. Visit U.S Energy Information Administration to learn more about historic and current natural gas prices.
BMU and MMPA are actively looking for ways to mitigate these increases by researching future energy purchases with lower costs and ways to conserve energy. In addition, MMPA will leverage millions of dollars it has built up in better economic times from the 12 member communities to stabilize wholesale power rates. BMU also plans to reduce large capital projects and prioritize to help reduce costs.
We will look to rate experts to focus on fixed costs and fewer variable costs that impact our residents during these turbulent times. As your municipal utility, we do not have private investors to manage expectations, allowing us to control our reserves better to help protect our residents as our economy improves.
Energy & Cost Saving Tips
What our residents can do to mitigate volatility and keep their bills more consistent during this energy cost increase is to apply for budget billing with our Utility Billing department or by calling 763-682-1001. Energy Assistance information is also available on our City of Buffalo website.
Quick Energy Saving tips for residents to reduce their electric usage and costs:
- Increase temperature settings in your home by 2 degrees to use less air conditioning.
- Open the windows at night to cool your home.
- Change your light bulbs to LEDs. See City of Buffalo Residential LED Rebate Instructions (PDF).
- Unplug items when fully charged or when not in use.
- Grill meals rather than using your oven and inside appliances that may increase the heat in your home.
- Learn more about conservation from the U.S. Department of Energy.
BMU staff is actively looking to innovate and find ways to help our residents find rate stabilization along with MMPA working with our other city board members to come together for all of our communities during these challenging economic times.
Sources for further information
- Visit MMPA to learn more about our power agency.
- Visit MISO to learn more about load data and generation sources. MISO also has an app for tablets and phones to connect to.
- Visit U.S Energy Information Administration to learn more about historic and current natural gas prices.