ELY — Residents will see small increases in their water, sewer, and electric bills after the city council unanimously approved rate adjustments recommended by the Ely Utilities Commission following a public hearing this week.
The increases, which city officials described as modest and intentional, reflect rising operating costs while continuing a strategy of incremental adjustments designed to avoid the kinds of dramatic rate spikes that have caught utility customers off guard in the past.
“We’re trying to keep up with our costs, trying to keep our system maintained to an adequate level,” said Harold Langowski, the city’s clerk/treasurer, who presented the EUC’s recommendations to the council. “Same program. Just little small rate increases.”

What ratepayers will see
For water, the approved increase amounts to $1 per month on the fixed charge plus an additional 5 cents per 100 cubic feet of usage. The fixed monthly fee moves from $22.50 to $23.50, with the usage rate rising from $4.05 to $4.10 per 100 cubic feet. For the average residential customer — defined by the Public Facilities Authority as someone using 550 cubic feet per month — that works out to about $1.26 more per month, a 2.8-percent increase.
Sewer rates follow a nearly identical pattern. A $1 increase will be added to the fixed monthly fee, bringing it from $20.20 to $21.20, and a 5-cent bump on the usage charge, from $7.35 to $7.40 per 100 cubic feet. The average residential customer will pay about $1.28 more per month, representing a 2.27-percent increase.
Electric customers will see no change to their fixed monthly charge, which stays at $10.50, but will pay more per kilowatt hour. The change comes through the Energy Cost Adjustment, a mechanism adopted as part of a 2024 rate study. The 2026 ECA is set at 0.95 cents per kilowatt hour, up from 0.35 cents in 2025, reflecting higher projected wholesale power costs from Minnesota Power. For a typical residential customer using 700 kilowatt hours per month, that translates to roughly $4.20 more per month, or a 4.7-percent increase.

Keeping the lights on and the
pipes flowing
The rate recommendations emerged from the EUC’s Budget and Rates Committee, which completed its annual review of the water, sewer, and electric enterprise funds earlier this year. The commission met March 19 and forwarded its recommendations to the council.
Langowski said the EUC’s guiding principle has been to keep each enterprise fund at a cash-positive position at year’s end while maintaining adequate reserves for capital improvements and positioning the city to qualify for favorable loan rates on larger projects.
“One of the strategic goals of the EUC over the past several years has been to ensure the operating fund balances are enough to avoid major rate increases and allow the EUC to plan long term,” the commission wrote in its memo to the council.
That strategy appears to be working. A cash balance chart presented to the council showed the water, sewer, and electric funds have remained relatively stable since 2018, with the funds showing steady growth to over $5 million.

Last year’s larger water increase
set the stage
Ratepayers who noticed a steeper increase in their water bills last year weren’t imagining it. The 2025 water rate increase was about 18 percent, a deliberate move to meet revenue requirements set by the Public Facilities Authority in connection with a potential low-interest loan for a major water system improvement project.
“Last year was a more sizable increase,” Langowski said. “This year, much smaller at 2.8 percent, more of a typical increase.”
The water system project centers on replacing a deteriorating supply line from Burntside Lake, with the scope recently expanded to include water main replacement on Sheridan Street. Langowski said the city currently carries no water utility debt other than a lease on the county garage, which is set to expire in 2027. The next expected debt payment would come from the Burntside Lake pipeline project, which the city hopes to have underway this year.

The electric picture
The electric utility’s rate structure has undergone the most significant changes in recent years. In 2021, the EUC joined the Northeastern Minnesota Municipal Power Agency to collaborate with other Iron Range municipalities in negotiating wholesale power rates with Minnesota Power. The resulting contract, which runs through 2029, eliminated a volatile fuel-adjustment charge that had previously caused rates to swing sharply from month to month.
In its place, the EUC adopted an Energy Cost Adjustment formula following the 2024 Berg Consulting rate study. The ECA is set each January based on Minnesota Power’s annual cost projections, providing more predictability for both the utility and its customers.
The 2026 ECA reflects an estimated base power cost of 8.1 cents per kilowatt hour against a contract base rate of 7.15 cents, producing the 0.95-cent adjustment. Langowski said the estimate has tracked closely with actual costs in prior years and expects the same this year.
Commercial customers will see similar ECA increases across rate classes, including demand customers and dual-fuel customers with load-managed heat. The city has also established a time-of-use rate for electric vehicle charging with on-peak rates of 17 cents per kilowatt hour plus ECA and off-peak rates of 5.5 cents plus ECA, though Langowski noted no customers have signed up for it yet.

The customer base challenge
Langowski acknowledged that the long-term health of the utility system is tied not just to rates but to the customer base itself. A review of data going back to 2007 shows a gradual decline in the number of customers and total water consumption, a trend that puts pressure on fixed-cost recovery.
“The customer loss and the amount of less usage, less water pumped and sold … it’s a big number,” he said.
New housing development, however, could help reverse that trend. Langowski noted that a planned multi-unit housing project would add individual electric meters for each unit, expanding the customer base and spreading fixed costs more broadly across ratepayers.
Increased conservation, while beneficial environmentally, also plays a role in reduced revenues. “Conservation benefits the utility. You don’t want to see people wasting resources,” Langowski said, “but when we see a reduction in customer count, those base charges are what covers most of the fixed costs.”