Council establishes capital-project fund for city’s electric system
Published 7:38 pm Tuesday, May 1, 2018
City officials have differing views when it comes to how to use money in the electric department’s fund balance.
One council member wants to return some of that money to power customers in the form of a reduction in their energy costs. Staff members prefer using some of that money for capital-improvement projects.
After nearly 30 minutes of discussion last week, the council voted 4-1 to establish a capital-project fund for major maintenance and improvement projects in the city’s electric system. Council members Doug Mercer, Richard Brooks, Virginia Finnerty and Roland Wyman voted to set up the fund, but Councilman William Pitt voted against it.
“I asked that we reduce the energy cost by 5 percent because we had had, over the last three years, nearly a 20-percent drop or decrease in our wholesale costs. We, in essence, passed along 6 percent of that during the first year when we sold the assets and got the big 16-plus-percent reduction,” Mercer said. “At that time we said 6 percent based on the assumption from the power agency that there was going to be a 3-percent increase every year for the next 10 years. We haven’t had a 3-percent increase yet. In fact, in the second year when there was a 3-percent increase projected, we got a 4.5-percent reduction. This year when we got a 3-percent projected increase, we got no increase. Next year, the projection is there’s going to be a 3-percen increase, but at the last utilities commission meeting, the commission denied (Duke Energy’s) request for full funding … that they had requested for coal-ash cleanup. Part of our contract with Duke — if they get a reduction in their coal-ash cleanup, we get a portion of that reduction. I, personally, don’t see that we’re going to get a 3-percent increase next year. We might get a little, but don’t think we’re going to get any.”
Mercer said the North Carolina Eastern Municipal Power Agency, from which the city buys its power, has a fund balance over $150 million.
“I sure would like to see us reduce the energy cost to our electric customers by 5 percent,” Mercer said.
Presenting some calculations to his fellow council members, Mercer said the city rate for 100 kilowatts of power is $19.62, but a 5-percent reduction would reduce that amount to $19.04. He further noted that the energy cost on 800 kilowatts (nominal average power use in the city) comes to $101, but a 5-percent reduction would lower that amount to $96. “That’s $60 a year for the average customer in the City of Washington,” Mercer said.
Mayor Mac Hodges said the city could realize it has plenty of money in the electric department’s fund balance (rainy-day fund) and decide not to send out power bills in July. Mercer said that could happen because the electric department has a sizable nest egg in its fund balance.
“In my opinion, we’ve added $14 million to our fund balance in three years, and it’s time to give some of it back to the customers,” Mercer said, eliciting a quick response from City Manager Bobby Roberson.
“Councilman Mercer, I might object to that. We have looked at the capital-improvements program. As the mayor said, we’ve kicked a lot of things down the road on this. There are specific project that we, the city, have moved out on the capital-improvements program. I seeing projects today that are not in the CIP, but three years down the line we’re going to have some major failures out there,” Roberson said.
Jeff Clark, the city’s electric director, said money in the fund balance should be spent on projects in the CIP that have not yet been funded. Clark said one project would cost between $6 million and $8 million to complete, “but not a penny has been spent on it.”
Roberson interjected, “If you want funding to do the projects that we’ve got ion the CIP, you’ve got to be careful about the reduction. That’s all I’m saying.”
Clark stressed that some CIP projects need to be funded and completed as soon as possible to avoid potential problems with distributing power.
Mercer said he would like the city to set up a capital-project fund for electric system maintenance. He suggested allocating $312,491 for that purpose in the upcoming city budget. “That would take the money that you’ve got in the miscellaneous budget for future capital projects and put it in that fund for future projects,” Mercer said before making the motion to set up the capital-project fund.
Councilman Richard Brooks said he preferred keeping the $312,491 as a line item in the electric department’s budget instead of moving the money to a capital-project fund.
“Either one gets us to where we need to be,” Roberson said.