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Wendy Reuer, Published November 07 2013

Anheuser-Busch tells Moorhead it may close plant if utility rates keep rising

MOORHEAD – If utility rates keep going up, Anheuser-Busch – one of Moorhead’s largest utility customers – would consider closing its malt plant.

The Moorhead Public Service Commission conducted a rate hearing Thursday after proposing to increase electricity rates 3.5 percent and water rates an overall 3 percent in 2014.

General Manager Bill Schwandt said the goal is to not increase electricity rates in 2015 or 2016, but water rates could go up as much as 5 percent in 2016 as fire protection is phased in.

While the impact on water bills of some residential customers would be less than $1, large MPS customers, such as the Anheuser-Busch plant would be paying thousands more.

According to Anheuser-Busch, a 5 percent increase in water fees would cost the company $25,000 to $30,000 on top of the $550,000 it pays annually.

Ralph Judd, director of raw materials for Anheuser-Busch in St. Louis, said a continual increase in utility costs in Moorhead would put the plant – now one of the smallest malting facilities in the area – on the chopping block for closure.

“It would sure make it less beneficial to continue operating in this market,” Judd said at Thursday’s hearing.

The company pays about $1.2 million in electricity costs and another $600,000 in sewer costs, Judd said.

While Anheuser-Busch has eyed the Moorhead plant for expansion as early as 2016, Judd said the company won’t expand if utility costs keep rising.

Not long ago, the Moorhead plant came close to closing. Judd said Anheuser-Busch’s 2011 decision to close the malting plant in Manitowoc, Wis., was due in part to its production costs.

“It was either Moorhead or Manitowoc; one of them was going to go,” he said. “We would like to stay in Moorhead forever.”

The Moorhead malting plant was built in 1978 on 150 acres of the city’s industrial park. In 2012, the plant shipped 1,651 rail cars and 170 trucks of malt to four of Anheuser-Busch’s 12 domestic breweries.

“So, we’re dealing with a multinational firm that could close a plant here any minute,” MPS President Ken Norman said Thursday.

Beer malting plants are where the process of changing barley into “malt” occurs. The barley is cleaned, germinated and dried to become malt. Often called the “heart” of beer, malt is what gives beer its flavor and alcohol.

The plant contracts with farmers in the region to malt about 7 million bushels of barley each year.

In comparison, the Cargill malt plant in Spiritwood, N.D., which is about 100 miles west of Moorhead, produces about 28 million bushels each year. The Spiritwood plant has a wastewater treatment plant on site and does not have to pay water fees.

Why the increase

Proposed increases in both water and electric rates have stayed between 3 and 5 percent yearly since 2003, with the exception of 2008 and 2009. In 2008, water rates jumped up by 12.5 percent and electric rates were increased by 10 percent, followed by another 12 percent in 2009.

In 2012, electric and water rates increased by about 2 percent and in 2013, water rates rose by 2 percent and electricity rose 2.6 percent.

Norman said Moorhead Public Service does not generate its own power. Instead, it buys electricity from the Western Area Power Association and Missouri River Energy Services. The two suppliers are raising their rate, which means MPS must consider increasing its own rates to offset the costs.

MPS has proposed the increase in water rates to help pay for capital improvements, including a $7.3 million in water main replacements and $6.9 million for a high-service pumping station.

MPS is also trying to strengthen its reserves over the next four years.

Commissioners said Thursday that it is important to have enough money in reserves because the MPS acts as “its own insurance policy.” For example, if a catastrophic ice storm wiped out power and utility infrastructure across the city, MPS would need to pull from its reserves to pay for repairs.

MPS also transfers 17.3 percent of its revenue – about $8 million – to the city’s general fund and 5 percent to the city’s capital improvement fund.

As the city prepares to finalize its 2014 budget, the amount of transfer will be on the table, Councilman Mike Hulett said Thursday. City charter states the City Council can ask for up to 20 percent from MPS.

“If we were to cut the transfer in half, to $4 million, we would have to raise property taxes in that amount to make up for the reduction in transfer,” Hulett said. “The city could not just arbitrarily decrease the transfer without finding ways to offset that.”

Under the proposed increases, residential customers using 850 kilowatt-hours would see a monthly increase of $8.65 from June through August and an increase of $1.85 per month from October through May. Residential water bills for the average user, or one who paid about $27 per month for water in 2013, would go up about 52 cents per month.

After Thursday’s rate hearing, residents and businesses have 30 days to submit comments to MPS regarding the rates.

MPS will vote on the rate increases Dec. 17.

Schwandt suggested the city try to work with Anheuser-Busch to find an incentive for the company to grow in Moorhead.

“They are our largest water user,” Schwandt said. “An incentive for a few years should be something you should take a serious look at. I think the message is clear that we need to be paying attention to what (Judd) is saying.”

Readers can reach Forum reporter

Wendy Reuer at (701) 241-5530