A steep rise in building insurance rates surprised utilities board members at Tuesday's regular meeting.

"We really didn't know that it was going to have this big of an impact," General Manager Jerry McCarthy said Wednesday.

Austin Utilities currently pays $165,000 a year for insurance. The projected rates-hike would bring that number to $325,000 to $330,000 a year.

"This year we can probably absorb that," McCarthy said. "But we're going to have to take a hard look at our budget next year."

He said that the utilities buildings were concentrated over a very small area -- about five acres. This means that if something happened in the area, the utilities company could lose everything. If the buildings were more spread out, rates would be cheaper.

"Somebody could park a bomb and take out most of it," McCarthy said. "Not that that is something that we worry about, but the insurance company has to think about it."

Possible losses in case of a fire or other disaster also contribute to the high rates.

In other business, the cost for installing gas and water lines increased from $200 to $300 for the residential sector and $300 to $400 for the commercial sector.

The board also spent time discussing possible changes to the method of charging for installation and repair of water mains. McCarthy said that under the current system, property owners adjacent to the area being worked on are charged. However, if there is an empty lot adjacent to the water main, the utilities company gets charged for the work. The new system would simply divide the total cost between all adjacent properties.

A motion to change the source of funding for the Energy Management Program, a program which pays large companies money to interrupt their usage during peak periods, from the Southern Minnesota Municipal Power Agency (SMMPA) to Austin Utilities was passed. McCarthy said that this would not hurt the budget.

"If (the companies) interrupt their usage during the highest period, the savings more than offset the costs of the program."

Matt Merritt can be reached at 434-2214 or by e-mail at :mailto:matt.merritt@austindailyherald.com