Austin Utilities customers will see their electric and water rates increase in 2016, but natural gas costs should drop.

The Austin Utilities Board of Commissioners approved a proposal to increase electric rates by 2.4 percent and water rates by 6.9 percent at the board’s Nov. 10 monthly board meeting.

Natural gas costs are expected to decrease over the year. These savings will be reflected as a credit in the gas portion of the bill.

The average residential customer will see an electric increase of $1.55 per month over their current billing rate based on usage of 620 kilowatt hours — an increase of 2.4 percent — and $1.52 per month for water based on usage of 4,488 gallons or 6 CCFs — an increase of 6.9 percent.

The rate adjustments will become effective with bills received in January 2016.

The utility cites an increase of 6 percent in wholesale power as the driver behind the electric increase. Wholesale power costs typically make up between 70 to 75 percent of the ultimate retail rate. This is the first wholesale electric rate increase from Austin Utilities wholesale electric provider, Southern Minnesota Municipal Power Agency (SMMPA) in six years.

“SMMPA has made every attempt to control costs to avoid rate increases over the past six years” said Mark Nibaur, Austin Utilities general manager and vice president of the SMMPA board, said in a press release. “The decision to increase rates is difficult but necessary in order to maintain the Agency’s long-term financial integrity and allow it’s members to continue to provide the reliable electricity our communities have come to expect.”

The main drivers in the wholesale rate increase are changing wholesale market conditions, increased debt service, a diversification of SMMPA’s generation mix, including renewable energy, increased regional transmission costs and other escalating business costs.

The water increase is driven by major necessary infrastructure improvements. A water cost-of-service and rate design study completed in the fall of 2014 by Utility Financial Solutions LLC recommended an increase in water rates that has been implemented in steps over a period of time.

There were no rate adjustments recommended for gas, meaning no rate increase. In fact, the utility is anticipating 5.6 percent lower gas commodity pricing. These savings will be passed along to customers through a monthly bill credit. During months when gas commodity prices are low, the credit will be seen as a line item in the gas charges section of the bill.

“We strive to balance costs and infrastructure improvements to continue to provide exceptional service,” Nibaur said in the release.

As a consumer, there are steps you can take now to manage your energy costs. Austin Utilities’ full range of billing options and conservation programs are designed to help customers manage or reduce their energy bills.

Simple steps like lowering a thermostat between six and nine degrees when sleeping or work, for example, can save up to ten percent per year on heating costs.

For more information Austin Utilities programs, contact Austin Utilities at 507-433-8886 or visit our website at www.austinutilities.com.