An Unimpressive Report, Part 3
$60,000.00 for that? Seriously, the City of Great Falls was charged $60,000.00 for that report?
Considering it came in months late, one would have expected something more than what is, in essence, a warmed over recitation of old history layered on a very superficial analysis.
First, I discussed the larger substantive points, then I considered the report in the context of some intervening events, and also highlighted some miscellaneous issues. Now I want to discuss a couple points demonstrating that the report is, at absolute best, a starting point for a thorough analysis of the ongoing viability of Electric City Power.
Let’s begin with a look at the consultants’ solution to the financial difficulties facing Electric City Power: “Immediately begin negotiating rate increases with ECP customers….an overall increase of 10% among all customers is reasonable and fair to existing customers.” (Consultant’s Report, p. 5-1) In other words, increase your revenues by 10%.
This is a financial analysis? To take a cursory look at financial statements, an afternoon’s worth of work, and then simply opine that we need an additional 10% in revenue?
The consultants have access to all of the contracts of ECP customers. Travis has gone through them and determined that at least 56% of the contracts have locked-in power rates. The consultants offer no analysis of what contracts can reasonably be expected to be renegotiated, no analysis of new rates, and no analysis of just why we might expect, say, Benefis to agree to a 10% rate increase when they have for several years borne the risk of a fixed rate contract. The solution proposed by the $60,000.00 report is to hire a $60,000.00 a year staff accountant with “experience with electricity rates and contract negotiations.” The accountant could “at the discretion of the City Manager” report to Coleen Balzarini.
Instead of real analysis, they just tell us to hire an accountant that is good at negotiating, and raise our rates. Poof! Problem solved.
Second, weren’t the consultants hired to analyze whether the City should continue in the power business and how much it might cost to get out of the business? How, then, can we explain this statement in the report (at p. 3-7), “Costs for closure of contract with SMEC for recovery of stranded asset costs (as outlined in Section 5.0 of this report) have not been included.”
In other words, all of the money we have invested thus far has “not been included.” Doesn’t that sound strangely like what we have been hearing from City staff?
Third, if we have problems with the open government laws, just don’t go to the meetings anymore. No analysis of how one might justify an expenditure of taxpayer dollars on a venture about which we will stay purposely uninformed. If we have problems complying with the utility’s enabling ordinance, since ECP hasn’t been self-sustaining from the get-go, just change it.
Fourth, what are the consultants’ recommendations going forward? Well, among other things, the City should consider “ECP’s financial performance” and its “ability to lower or eliminate debt and other financial obligations.” Oh yeah, don’t forget to consider ECP’s “success in obtaining long-term profitability” and its “success in elimination of some or all debt and other financial obligations.” This isn’t exactly high-level consideration of the problems our City faces and the alternatives available to meet those problems, is it?
Aside from what you think about the substantive conclusions of the consultants, I think one has to consider the level of effort and competency applied to the task at hand. Wouldn’t good stewards of the taxpayers’ money concern themselves initially with the question of whether the consultants even did all of the work for which they seek payment?
As someone who prepares expensive reports for institutional clients, I can tell you these things are subject to negotiation. Who at the City will raise these and other questions on our behalf?
Thanks Gregg for your continued analysis on this ’schlock’ report that’s self-serving to the city staff. This is going to pick up ‘more steam’ as we roll to
a ‘Happy ECP new year’!
The quality of a consultant’s efforts is in direct relation to the competency of the organization that is retaining the studied opinion of an ‘expert’ .
In this case, the client did not want the report to produce a solid product so the consultant produced meaningless trivia. Another reason that government is unable to compete in a business that is rife with issues of ‘risk’ taking.
The loss suffered to date by the taxpayer is the least that it will ever be. Close the door while you still have a door.
The report is exactly what the city staff wanted and none will demand that a report addressing the issues without all this fluff BS be re-accomplished. Remember the city staff believe that this city is full of uneducated people and they are the all-seeing educated leaders of us uneducated fools.
Our City Manager should just send it back with a big red “F” (for failure to accomplish the task for which you were paid) and ask that all payment’s be returned. If that money is not returned we should let the consultants know that we intend to publish this, inept seventh grade paper, in all the engineering journals for the world to see the level of their competency.
You don’t deal with consultants much do you.
Anon, no but I know when I have been screwed, do yo?