The Estherville City Council gave final approval to the electric rate increase of one cent per kilowatt hour at its meeting on Monday.
The increase will take effect for electric service and rates billings on Dec. 31, 2012.
Council had approved the first reading of the rate increase at its Nov. 5 meeting.
Estherville City Administrator Penny Clayton again explained the reason for the increase.
In a memo to council, Clayton said in fiscal year 2012, 60 percent of the city's expense was from the purchase of power. Even though the city bought 3,317,800 few kilowatts, the city spent $83,144 more. The average cost of power, including demand, increased 8 percent between fiscal years 2011 and 2012.
Rates from Iowa Lakes electric increase for energy and Clayton anticipates a small increase in 2013 based on information previously received.
City officials were notified this month that rates for WAPA (Western Area Power Administration) would not be changing in 2013 for either demand or energy.
Excess revenues collected will be used to upgrade four of the engines to be compliant with the EPA requirements for reciprocating internal combustion engines.
In a comparison of electric utility revenues and expenses for the next few years, Clayton has projected a small net profit in fiscal year 2013 with the rate increase. The utility is expected to have a profit of around $150,000 in fiscal year 2014, but deficits are projected for fiscal year 2015 and 2016 when the next increase could occur.