GeeGuy's Guest Opinion

If you don't get the print version of the Tribune, you missed GeeGuy's guest opinion in today's paper. It's not online, so here goes:

Questions before city goes on with electric utility plan

Guest Opinion

The following is an open letter to our City Commis­sion. Nearly the exact same letter was sent in electronic mail format to one of the commissioners on Jan. 10. In the more than 150 days that have passed, and despite sev­eral follow-up contacts, I have not received a substan­tive response to my inquiry.

Therefore, I have modified it to address all of our com­missioners and hope that one of them will offer a response:

Honorable Commissioners — I have a difference of opinion with the majority of the City Commission on the advisability of the city’s foray into the electric utility busi­ness. My concerns are not primarily environmental in nature, but instead stem from what I believe to be a string of poor management decisions made after it became apparent that the city would not be allowed to provide electricity to its resi­dents (other than the select few who found their way into the “pilot program”).

I am hopeful that, as city commissioners, you might have an easier time than I have had obtaining answers to a few simple questions, questions that I think should be fairly obvious from a busi­ness standpoint.

One of the goals of the city’s entry into the utility business is the provision of “economical” power. We have spent significant sums of money to get to the point where we are right now. We have spent more than $1.5 million so far in start-up expenses for the coal plant.

The electrical utility has lost hundreds of thousands of dollars each year since it started. We owe at least hun­dreds of thousands of dollars to SME for the credit they have been giving us against power costs, i.e., the “water credit.”

We have $1.4 million of city money tied up as a secu­rity deposit. One local blog­ger suggests we have spent more than $400,000 on the utility in the last year alone. We don’t even know what the taxpayers are paying each year in wages to city employees who are working on utility business.

Based on the foregoing, then, it certainly seems a fair question to ask just what can we expect from all of this money? In other words, how much are we going to need to save every year in order to justify the present outlay? Exactly how much, on an annual basis, has the city paid for electrical power since 2000?

Exactly how much, on an annual basis, does the city expect to pay going forward? These numbers need to be strictly generation costs, not transmission costs, internal costs, and related fees and expenses.

Here’s an example of what I am talking about.

Let’s assume that the city pays $750,000 per year for electric power at present (I am excluding transmission because the city will have to pay for transmission whether or not it builds a coal plant, because the city doesn’t own poles and wires.). If the city figures to save 10 percent per year, or $75,000, on its annual electric bill for the next 40 years, at 7 percent interest, that would justify a present expenditure of $999,878.16. We’ve already spent/lost more than twice that.

If the city figures to save 25 percent per year, or $187,500, on its electricity for the next 40 years, that would justify a present expenditure of just under $2.5 million. If we have not already exceed­ed that sum, we are certainly approaching it. (By the way, those rates of return exclude ongoing operating expenses, an unlikely scenario.)

You can see where I am going with this. I am simply struggling with the econom­ics of the city’s proposed investment. I can only assume you have or will carefully examine the pro­posed financial arrange­ments.

I am asking that you obtain this sort of informa­tion from the city’s account­ants. I assume different sce­narios like the foregoing have been analyzed in detail given numerous differing assumptions about the future costs and expenses. I con­tend that it would be irre­sponsible to press on with a project of this size without such a detailed analysis.

If these scenarios have been considered, I have not been able to obtain them. Just how much do we presently spend for electrici­ty? How much do we think we will save the taxpayers?

What is the best-case sce­nario? What is the worst­case scenario?

I want to know, and I think you probably do too.

Thank you, honorable commissioners, for your service to our community.