A $268 million budget that assumes a 4 percent rate hike beginning in March was approved Friday by the Lincoln Electric System Administrative Board.

The proposed hike is necessary to make up a $7.5 million revenue shortfall next year due to increased fuel and coal hauling costs, as well as other factors affecting the utility in a tough economy, LES officials say.

They stressed that even though the hike is included in the 2009 budget, it doesn’t constitute approval of any increase for next year.

“The rate process is an entirely separate process,” said Keith Brown, the utility’s chief financial officer.

Rate hikes must be approved not only by the LES board but also the City Council, which earlier this year gave its OK to a 9.1 percent increase.

The 2009 budget also includes a 2.75 percent increase for the utility’s wage and salary program. Board member Dawn Rockey stressed the figure is not an across-the-board wage hike for employees and it will be up to management to determine individual salary increases.

The 2.75 percent figure is separate from a 3.25 percent increase next year for workers who belong to the International Brotherhood of Electrical Workers.

The 2009 budget — $17.4 million less than the current budget — will be the subject of a public hearing before the City Council on Dec. 1. A vote is set for Dec. 15.

Coby Mach, representing the Lincoln Independent Business Association, addressed the board before the vote and suggested LES look for ways to reduce the proposed rate hike to help the “poor and disadvantaged.”

But he commended LES management and the board for their work on the 2009 budget, especially for finding ways to reduce internal operating costs.

But he said LIBA has the following ideas for cutting costs:

* Keep interest earned from the Rate Stabilization Fund in the fund and not spend it on operations, as is the current practice.

* Reduce retirement benefits to reflect those in private industry.

* Work with city officials to find ways to save electricity, like turning off every other street light or turning off lights completely between 2 and 3 a.m., as long as there is no impact to public safety.

* Make “small efficiencies” in operations, like publishing its annual report on lighter paper stock.

Board member Patrick Beans suggested that keeping the interest in the Rate Stabilization Fund is something the board should consider.

But the fund only has about $2.6 million in it and the 2 percent interest it earns is not a lot of money, he said. LES needs to invest the fund’s money for shorter periods of time so it can be accessed quickly when needed, he added. Next year’s budget includes adding $4 million to the fund.

LES made changes in its budget, including cutting its advertising budget by $146,300. The utility also came up with a more detailed sustainable energy program and plans to spend $1.1 million to help customers and business save on their energy bills.

Board member Marilyn McNabb said that amount doesn’t reflect what LES should be doing. She is pleased with the $1.1 million, she said, but not “satisfied” with it.

Reach Algis J. Laukaitis at 402-473-7243 or alaukaitis@journalstar.com.