Two Big Things
…I’m glad I could share with all of you a partial digesting of the Burns & McDonnell report. Having skimmed it once, read it twice, and annotated the heck out of my desk copy, here are a couple of big disputes of analysis that come to the fore for me:
1) The consultants go on and on talking about how ECP customers are just so elated and have saved so much money compared with Northwestern rates.
My response: Well of course they have. As has been pointed out before on this blog (and republished — thanks Bill Z — on the Cascade County Republican newsletter Target), city taxpayers have been subsidizing ECP customers’ power bills since this public utility was founded! If we were actually to pursue rates that put ECP in the black by 2011 and didn’t force the corporation to steal from other city funds, rates would have to go up by 32%. In other words, pricing power at its true cost to the City would make our power more expensive than NorthWestern’s.
Unfortunately, the consultants never really connect the dots between “ECP customers saving money on their power bills” and “taxpayers subsidizing our energy buys”. Maybe they were being polite or understated vis-a-vis the hand that pays them. The consultants do recommend a rate hike of 10%; they don’t really say how they arrived at this nice, round number, but I agree that taking steps to bring ECP customers in sync with actual energy prices is the only way to recover a part of our debt.
2) The consultants, as well, pretend that ECP is on the brink of a wildly profitable future. I’m not so sure about that, and neither are a lot of people familiar with this whole episode.
ECP’s viability hinges on SME’s ability to construct a natural-gas plant that produces cheaper-priced electricity than NorthWestern’s. There is a dispute of analysis over whether this will actually work.
Let’s review. On one hand, Yellowstone Valley co-op pulled out, its managing director explaining in September of this year that SME’s rates were the “highest in the state” of any co-op, and saying this month (pg 2 of this pdf) that because of SME’s agreement to buy more power than it can use from PP&L, that it will have to dump the power on the open market at unfavorable rates leading to YVEC and member co-ops having to raise rates on their customers again. (This directly contradicts the consultants, who say that while they haven’t actually seen the SME-PP&L agreement — it’s proprietary — they believe it gives a great deal to SME’s member co-ops). Meanwhile, the venerable ratings firm Standard & Poor’s, agreeing with YVEC, forecast “above-average retail rates” for SME customers due to the natural-gas plant switch. Greg Jergeson, the state’s top energy regulator, adds that a key chart comparing NWE to ECP rates is factually inaccurate, and has said before that SME’s fuzzy math makes it appear that the City is getting a good rate (the blended rate) but that this cannot be sustained.
The consultants, on the other hand, seem to think affordable, long-term power is in sight, and that the bargaining Tim Gregori has done has been spot-on.
I’ve an inkling who’s right, but I’m willing to hear the sides out. I do know that our consultants have seemed to pick the minority opinion and some dubious numbers. They’ve got some e’splainin’ to do.
Precisely Travis and Bill Zucconi assessment correct.
The consultants did remind us all that that ECP plundered other city funds
to stay subsidized. The report however is still distorted, dismissed
public transparency and the city manager himself said it is incomplete.
Public power might be a noble goal, but the ECP model is flawed and the
public had no vote. “Finally, how exactly do the consultants advise us
toward an exit strategy to unwind ECP should the city choose to do so?
Garbage in = garbage out. Keep on polishing that turd ECP.
Travis good report only problem is, it is not new as many citizens have been in front of the ECP Board, these past three or more years, extolling the same facts and figures proving “BROKO ECP” and showing the raiding of the taxpayers coffers, to only be met with blank stares, sneers, and silence in return…..