Electric City Weblog

An Open Letter

I know City Commissioner Bill Bronson, and I like him. He’s a bright guy and a good lawyer. I’ve encountered him once or twice over the years, and I know his analytical mind is always well-prepared.

I also know Bill well enough to know that, like me, he subscribes to the notion that a person who disagrees with me on 2 out of 10 political issues is not my enemy.  The fact that I disagree with Bill on the coal plant issue does not make it less likely that he will do a good job on the City Commission.

Also, the fact that we are both lawyers convinces me that, unlike some local politicians, political disagreement does not translate into personal animosity.  I am sure Bill and I could discuss, even argue about, the coal plant, and still remain just as friendly as we are to this day.

With the foregoing in mind, and after reading Firefly’s great post about the coal plant, I offer this open letter to City Commissioner Bill Bronson:

Dear Bill,

As I think we have discussed, you and I have a difference of opinion 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 know from experience, though, that you are an analytical fellow. I also know from observing you in your prior political positions that you keep an open mind. Now that you have been elected to the City Commission (congratulations, by the way), 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.

Exactly how much, on an annual basis, has the City paid for electrical power since 2000? This number needs to be strictly generation costs, not transmission costs, internal costs, and related fees and expenses.

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 over $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 dollars of City money tied up as a security deposit.  One local blogger suggests we have spent over $400,000.00 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?

Here’s an example of what I am talking about.  Let’s assume that the City presently pays $750,000.00 per year for electric power (I am excluding transmission because the City will have to pay for transmission whether or not it builds a coal plant; the City doesn’t own poles and wires.)  If the City figures to save 10% per year, or $75,000.00, on its annual electric bill for the next 40 years, at 7% interest that would justify a present expenditure of $999,878.16. We’ve already spent/lost over twice that.  If the City figures to save 25% per year, or $187,500.00, 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 any 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.  It would constitute malpractice on the part of our local officials to press forward with a project of this magnitude 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 worst case scenario?  I want to know, and I think you probably do too.

While I have not had a great deal of success in finding answers to these inquiries, I look for you to do better than I have. I also know that your fellow Commissioner, Mary Jolley, will support you in this inquiry.

Please convince me that the City’s entry into this business makes economic sense. And, being a lawyer, if you do so I can rest assured you will do so with facts and evidence, not talk.

Thank you, Bill, for your service to our fine community.

Sincerely,

Gregg Smith

Posted in Coal Plant, Great Falls City Government | 16 Comments »