Firm to review WEU’s operating budget

Published 8:18 am Tuesday, February 13, 2007

By Staff
Charged with finding additional revenues, cutting expenses
By MIKE VOSS, Contributing Editor
A professional services firm has been hired by the city to review Washington Electric Utilities’ operating budget to locate areas where increases in revenue or decreases in expenditures could be achieved.
The Washington City Council voted 4-1 to select Cherry, Bekaert &Holland, LLP to perform the analysis and provide recommendations based on its findings at a cost not to exceed $5,000. At its Jan. 8 meeting, the council instructed City Manager James C. Smith to seek such services.
Council members Mickey Gahagan, Richard Brooks, Archie Jennings and Darwin Woolard voted to hire the firm. Councilman Ed Gibson voted against the proposal.
Bellwether Management Solutions and Cherry, Bekaert &Holland, LLP, each based in Raleigh, submitted proposals to perform the analysis and make recommendations. Bellwether estimated it would cost the city about $4,500 plus out-of-pocket expenses for it to conduct the review. Out-of-pocket expenses are estimated to be no more than $350, according to the Bellwether proposal. CB&H proposed billing the city at its standard hourly rates for the people performing the work, plus expenses. The per-hour rates range from $140 to $285 an hour, depending on the person doing the work.
The city has been trying to get a better grasp on Washington Electric Utilities’ fiscal matters since it learned about a project shortfall in the electric fund for this fiscal year.
Last month, the city received a study recommending a restructuring of the city’s electric rates by increasing those rates by 3 percent systemwide. That report also indicated the restructuring would occur in January 2008. The proposed changes would enable the city to increase Washington Electric Utilities’ fund balance, or reserve fund, by about $1.1 million each year for three years.
That study was ordered by the council in October 2006, when it increased the city’s electric rates by 5.25 percent to avoid a projected $1.6 million shortfall between wholesale power purchased by Washington and revenue from retail power sales in the remainder of the current fiscal year, which began July 1, 2006, and ends June 30 of this year. The increase was made to the wholesale power cost adjustment part of the city’s electric rates.
Gibson said he couldn’t go along with hiring Cherry, Bekaert &Holland because the city has been paying thousands of dollars to Booth and Associates, an electrical engineering consultant that has been doing work for the city in recent years. Gibson said he didn’t see the need for a new set of eyes to look at the situation. Gibson also said the work to be done by Cherry, Bekaert &Holland is something the city’s new enterprise-funds controller should do, once that person is hired. The controller will be responsible for making sure the city’s enterprise funds run more self-sufficient.
Gahagan reminded Gibson the council had previously discussed bringing in a third party.
The report presented by Booth and Associates last month called for the rate for residential service to increase by 3.6 percent. Other rate categories would change, too. A decrease of 1.2 percent in the small general services rate is proposed. Other increases include a 1.6 percent jump in the medium general services rate, a 4.7 percent jump in the large general services rate and a 5.4 percent jump in the industrial service rate. The rate for outdoor lighting would increase by 13 percent under the proposal.
The council has not acted on those proposals.
When the report was presented last month, several council members said they would have liked for the report to include more suggestions on how to decrease expenses as a way to bring WEU’s expenses in line with its revenues.
Jennings said then the city must look for ways to cut costs not related to buying electricity from its power providers. He said the report did not address cutting operational expenses, how to provide service cheaper and operating Washington Electric Utilities more efficiently.
For additional coverage of the council’s Feb. 12 meeting, see future editions of the Daily News.