Huntingburg considering 27% gas rate increase

Proposal aims to address utility’s financial losses, restore working capital

The Huntingburg Common Council is considering a significant increase in gas utility rates to address ongoing financial losses and restore depleted working capital.

The proposed rate hike, which could see residential customers facing up to a 27 percent increase on peak winter bills, was presented to the council at Tuesday’s meeting.

Buzz Krohn of Krohn & Associates, the city’s financial advisor, outlined the utility’s financial challenges, noting that the gas department has lost about $800,000 over the last three years and has had to borrow funds from other utilities annually to cover income gaps during the winter months–the council approved a $1 million loan from the electric utility at a recent meeting.

According to Krohn, the large increase is designed to overcome the steady revenue decline since 2008. The utility saw $5.1 million in revenue in 2008 compared to $3.9 million in 2024. This $1.2 million reduction in revenues is attributed to the decline in customer usage and demand over the past decade.

That, coupled with the increased operating costs associated with personnel, maintenance, and other expenses, have not been fully reflected in the rates, leading to a decline in cash flows.

“There’s really not an area that you can go in here and cut costs,” said Councilman Jeff Bounds. “We’ve got to buy the gas for a certain amount of money. There’s a certain amount of cost involved with installing gas and maintaining the lines. And unless I’m missing something, the department can’t continue to lose money indefinitely.”

“We want to make sure we correct, you know, right the ship as quickly as we can,” Krohn added.

The proposed rate adjustment would increase the base monthly charge for residential customers by $3 and the volume charge by $1.40 per MCF (thousand cubic feet). For a typical residential customer using 12 MCF during a peak winter month, this could result in a bill increase of $19 to $20.

Krohn emphasized that even with the increase, rates would still be lower than in 2008 when the utility’s annual revenue peaked.

The rate increase aims to generate about $4.8 million in annual revenue, up from the current $3.9 million. This additional funding would help cover operating expenses, replenish working capital, and reduce reliance on loans from the electric utility.

Council members expressed concern about the size of the increase and its impact on residents and businesses. Some suggested exploring ways to implement smaller, more frequent rate adjustments in the future to avoid such large increases.

“We hate seeing huge increases come up like this,” said Councilman Steve McPherron. “We’ve just been through this with the sewer; we’ve been through this with the water.”

Krohn acknowledged the council’s concerns, noting that expansion projects in those utilities drove the water and sewer rate increases. He told the council they could set a three-year rate study schedule in place to help mitigate the need for large rate increases in the future, though he added that the pandemic had accelerated the schedule of rate increases.

The proposed rate increase would take effect in April, potentially easing the impact on customers by starting during lower-usage summer months. The council introduced the rate ordinance and scheduled a public hearing for Feb. 25.

In addition to the rate increase, the proposal includes raising the gas connection fee from $500 to $1,000, bringing it closer to the water utility’s connection fee of $1,200.

The Utility Rate Advisory Board has reviewed the proposal and unanimously recommended the increases to the council.

As the council moves forward with considering the rate increase, members emphasized the need for better communication about utility finances and more frequent rate reviews to avoid large, sudden increases in the future.

“We need to continue this conversation on how we can keep this from happening to a future council down the road,” Bounds said. “And to the people of Huntingburg that are going to absorb this increase.”

The public hearing on Feb. 25, 2025, will provide residents an opportunity to voice their opinions on the proposed rate increase before the council makes a final decision.