Low electric rates and limited growth greatly appealed to me when I moved to Boulder City in 2014. Now it appears that both attributes will cease to exist as Boulder City becomes Henderson East. As a relatively new resident, I assumed that the draconian electric rate increases being discussed earlier this year would evolve into something more reasonable. With 25 years’ experience in the electric utility industry, I should have joined the discussion earlier.
Should a city with a substantial allocation of cheap federal hydropower have among the highest electric rates in the state? Should a utility whose revenue exceed costs by $2 million per year under existing rates be facing a capital equipment crisis demanding outrageous rate increases? The answer to both questions is no.
We’ve been told that the huge increases are needed to ensure reliability. The early years of the capital plan include vehicle purchases and new meters. Neither affects system reliability. Have operational strategies been explored that would postpone or eliminate other items in the capital plan? Could capital projects be reprioritized based on system criticality, while new vehicles and meters wait for later?
Consultants were hired to calculate the new rates, but it appears that they knew nothing about electric systems. They were given a starting point and a capital plan, then calculated rates necessary to support that plan. They apparently did no vetting of the capital plan whatsoever. Sorry, but a spreadsheet expert does not make rate increases legitimate.
Although the city is demanding more money, it doesn’t seem able to account for money already paid. Does anyone in Boulder City know where the missing money went? Employees were fired over ratepayer money that never got deposited. Has the money been found?
Also, where does $400,000 per year labeled “billing services” in the electric utility budget go? This is as much as the entire administrative line item. Where does over $700,000 per year labeled “transfers out” go?
I haven’t been in town long enough to know whether or to what extent the electric utility subsidizes other city departments and functions. We should know where electric system revenue is going before accepting higher rates.
What should the City Council do?
1. Rescind the rate increases immediately. Make them a contingency plan if better solutions can’t be found.
2. Hire a forensic accountant to determine where the money that Boulder City residents paid for electric service went. This study should include the “missing money” and any money that went for anything other than the electric system.
3. Create an independent board of citizens to oversee the electric utility. City Council would no longer perform that function. City Council would provide final approval for the annual budget, ensure compliance with city policies and approve all large expenditures, but it would not directly oversee or manage the electric utility.
4. Pass an ordinance that clearly separates the finances of the utility and the city.
I’ll give credit where credit is due. City Council got some things right. First, it tackled this issue rather than letting the next administration inherit a problem. Second, it repaid an old loan owed to the electric utility. Third, their strategy allows those concerned about the environment to use solar energy without financially penalizing the rest of us.
What I describe above has been in place since the 1980s in a city similar to Boulder City. The city kicked out the investor-owned utility and municipalized the electric system. I was a board member for nine years and chairman of that board eight years. Power rates there are currently lower than the “old” rates in Boulder City, and the electric utility enjoys an updated and robust infrastructure, money in the bank, and a long-term capital and maintenance plan.
When the economy took a downturn in 2008, the utility pulled forward purchases of vehicles and many planned infrastructure improvements. Vehicle manufacturers, electrical equipment manufacturers and contractors were desperate for work and offered fantastic pricing.
Meanwhile, the water and sewer utilities continued to lurch from crisis to crisis. In 2013, this city acknowledged the disparity and moved water and sewer under the electric utility board.
When Boulder, Colorado, was considering taking over its electrical system from the investor-owned utility, the American Public Power Association did a study of all such municipalizations of utilities by cities. It found only two success stories. One was the small town I was involved with. APPA determined the reason it was successful was the separation of the utility from the elected officials.
Politicians do many great things, but managing utilities is not among them. Please consider my suggestions. If implemented, in 20 years the system will be reliable, rates will be low, there will be money in the bank, and there will be a long-term spending plan based on well-vetted needs.