The board of directors of Southern Minnesota Municipal Power Agency (SMMPA) has approved a 16.9 percent rate increase to be effective May 1, 2006. Until a five percent increase that went into effect Jan. 1, 2006, SMMPA had not increased rates since 1992.

Higher industry-wide cost pressures for fuels used to generate electricity, such as coal, natural gas and fuel oil, have led to dramatic increases in wholesale market prices for electricity. The impacts of a new, federally mandated regional transmission power marketing organization also added significantly to SMMPAís costs in 2005. SMMPA is not alone as these factors have caused and will continue to cause electricity rate increases across the region and even across the nation.

Adding to these factors, Sherco 3, SMMPAís main power plant, was off-line from October through the first week of December for long-planned and necessary scheduled maintenance. During the same time period, natural gas prices remained at all-time highs - at times more than double the price earlier in the year - due to hurricanes in the Gulf.

Fortunately, the SMMPA board has manipulated a prudent level of financial reserves. These reserves allowed SMMPA to carry the initial impacts of the increased costs and to moderate their effects on the rates.

The year 2006 breaks SMMPAís 13-year trend of lowering the average wholesale cost of the electricity it supplies. SMMPA Executive Director and CEO Ray Hayward said of the boardís action, ìI feel the board made a good decision, balancing the needs of the Agency and the impacts upon the customers. Our primary focus is to be reliable and affordable four our members and their customers, now and well into the future. To accomplish these combined goals requires a rate increase at this time.î

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