Member Profiles: Austin Utilities

At the intersection of U.S. 218 and Interstate 90 in Southeastern Minnesota lies the city of Austin, Minnesota, also known as "Spam town." It has this moniker because the corporate headquarters and processing plant of Hormel is located in this town of 25,000 people. Hormel’s presence means lots of references to the mysterious canned meat, including the Spam museum, which is the third largest tourist attraction in the state. It also means a lot of energy is required to process and can Spam. A majority of this is provided by Austin Utilities, one of the largest public gas systems in the state.

Providing water, electric, and natural gas service to the town since 1900, the system has 118 employees to keep the systems running. The Spam plant is their biggest single customer of gas and electric, using a large share of the 1 ½ -3/4 BCF a year that flows through the system.

Jerry McCarthy, General Manager of Austin Utilities, describes his utility as "very progressive. We are always looking for new opportunities and revenue streams, such as partnerships with local coops and telephone companies." For example, they were just granted a charter change to offer additional services such as wi-fi access to the community.

The Museum of Spam in Austin, MN.

Revenues have of course been a concern, with the price roller coaster of the past few years. One innovative thing Austin is doing to lower prices is working with Northern Border to bring another pipeline to Austin from either Iowa or Minnesota to get some competition between pipelines. "Other communities should consider this option," according to Mr. McCarthy. "We have been trying to get this happen for about a year. We currently have as partners three other communities and three ethanol plants." The plants have enough load to make the economics of extending a pipeline worthwhile. "While it is not easily accomplished, working with many partners keeps the cost low."

Besides working to get competition, Austin Utilities has been hedging, pre-purchasing a portion of their winter gas out three years. This, combined with the warm weather, has helped to control their costs this winter.

While Austin Utilities has been working all these avenues in Minnesota to improve prices, they have been relying on APGA for many years as "THE national legislative/ regulatory group for public gas systems." While our Washington D.C. work has been very helpful, Mr. McCarthy thinks APGA needs to do more to educate city councils, commissioners, and other officials so they can understand what is driving gas prices. "Without an understanding of what drives prices up, it is difficult to get programs that will change those prices." The Monthly Managers reports are a good first step in that direction.

Originally in May 15, 2006 Public Gas News