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HomeMy WebLinkAbout1997-09-02 Municipal Operations Committee Minutes 411 Municipal Operations Committee Meeting Minutes September 2, 1997 Councilors Attending: Don Soucy, Mike Aube, Joe Baldacci, David Leen, Jim Tyler, Pat Blanchette Staff Attending: Edward Barrett, Joe McNeil, Erik Stumpfel, Bob Farrar Others Attending: Representatives of Bangor Hydro (Bob Briggs, Bill Cohen) , Charlie Curran, Various Media, Steven Ward - Public Advocate, Representative Saxl, Representative Baker Meeting Convened at 5:00 pm 1. Bangor Hydro Proposed Rate Increase This is the consideration of a proposed Council Resolve 97-384 concerning the request by Bangor Hydro for a rate increase of 15.58% . The resolve is sponsored by Councilors Leen and Baldacci. i Councilor Leen explained that the resolve was put together because of the concern of what affect the proposed rate increase of 15.58% will have on the general citizens of Bangor,small businesses, and the City' s budget and the possibility that it may require the Council to raise the tax rate further as a result of this. Councilor Leen is sure there are no simple answers and he understands that Bangor Hydro certainly has a position on this and that they feel they need this rate increase, but it is felt that the proposed rate increase is high. It is hoped that the Public Utilities Commission, the Public Advocates Office, other towns and cities in the surrounding area will take this same position. Councilor Baldacci stated that he appreciates representatives from Bangor Hydro and the Public Advocates Office attending this meeting to provide public comment. Councilor Soucy asked for further clarification of a letter that was provided to Council from Councilors Baldacci and Leen. This was a letter that was sent to other towns trying to encourage them to bring a discussion in their own communities with regard to the proposed rate increase. Councilor Soucy asked for a copy of direct testimony from Lee Smith, a senior economist that is referred to in the letter. Councilor Baldacci will distribute copies of this testimony to the Committee. This testimony looked at two alternative recommendations to put forward to the PUC. One of the recommendations was to analyze what would the rate increase be if Bangor Hydro accepted the rate cap plan that CMP had • operated under and the other is the alternative recommendation to look at their expenses and costs that they felt should be borne by • the rate payers. A recommendation is being made indicating that an $11.2 million increase would be more appropriate than a $20 million increase. Councilor Baldacci asked Mr. Ward to tell the Committee the position of the Public Advocates Office and the reasoning behind it. Mr. Ward explained that the Public Advocates Office represents rate payers and brought with him the schedule for the rate case which concludes in February, 1998. Other parties, the Public Advocates Office, and the PUC staff have now formally reacted to Bangor Hydro' s request for a $20.6 million increase. PUC staff has filed testimony supporting an $8 million increase. The Public Advocates office presented two alternative recommendations. One is a very low number, $2 million, which would have been the case if Bangor Hydro, last year, had gone into a rate cap form of regulation. The second recommendation was much higher, closer to $12 million. This corresponds to the calculations of individual cost items. It is still in an earlier enough stage that Mr. Ward doesn' t feel either recommendation represents the best guess. Councilor Soucy asked if the recent 4-5% increase granted Bangor Hydro would be replaced with whatever is granted in this negotiation. Mr. Ward explained that one would be netted against the other. He passed out copies of the order where the PUC approved a $5.1 million increase in rates in July. This was an emergency rate increase case where the PUC decided there was potential injury to Bangor Hydro' s customers and/or to Bangor • Hydro as a business. This $5.1 million will be deducted from the permanent levels of rate increase. Councilor Aube asked if this Council passes this resolve, would they then be supporting one of the alternatives, which would also be a rate increase. Mr. Ward explained that there has been no one on the case who has filed testimony calling for no increase. The question is what is affordable and what is necessary. The PUC has to balance what the company needs and what customers need. Councilor Aube' s point is how much being somewhere between $2 million and $20. 6 million. Edward Barrett said that the way the resolve is currently written it does not tie the Council into a specific amount, it just says the smallest possible amount, taking into account the hardships that such an increase will create for our citizens. Councilor Aube questions what is the appropriate responsibility of local government? The Committee has information that somewhere between $2 million and $20 million is probably an accurate number for an appropriate rate increase given the two factors. Mr. Ward is aware that the PUC has scheduled hearings in Bangor and Machias in the next few weeks, which would be an opportunity for concerned members of the public, including public entities, such as the City Council, to express an opinion of how the rate case could be resolved. He doesn't feel anyone expects people who are not parties to the case to have done the kind of homework that a litigant in the rate case would do, therefore he is not sure Council can come up with a number. Councilor Soucy agrees that he doesn't see how Council could come up with a number if they are not qualified to make that judgement. Councilor Aube's point is that the resolve is saying that the Council is qualified by saying • that $20 million is too much. Edward Barrett added that the logic of the resolve really focuses on expressing to the PUC the • concerns about the impact of the rate increase in the areas that were addressed by the letter that was sent out and in making sure that the PUC hears that information and takes it into consideration in coming up with their decision. The focus of what they might want to consider doing is just that, talking about how they see the rate increase affecting the City' s budget, the people on fixed income, small businesses in the community and business attraction to the area. Councilor Aube is not comfortable using words that "we oppose it". Opposition suggests that we are against it and we have an alternative. The Committee should indicate that this number, which is very high, would have the following impact on us. Charlie Curran (Pine Street, Bangor) : Mr. Curran feels that the citizens of Bangor are opposed to a rate increase. Public Utilities are going to do whatever they want to do irregardless of what the resolve says. Mr. Curran feels it is the people on fixed income who are the most hurt. He feels the resolve should state that the citizens oppose the rate increase and let the PUC decide what it wants to do. Bob Briggs (Bangor Hydro) : Mr. Briggs agrees with Mr. Curran that the appropriate resolve for the City is to express a concern about the level of the rate increase. Mr. Briggs gave background information which led up to the proposed increase. Part of the objection is not just the size of the increase, but also the fact that Bangor Hydro customers are not used to having an increase. • Bangor Hydro has managed to hold their rates flat since 1992. There has been no increase of any kind since 1994. That was a distinct strategy brought about by experience years prior to that which caused the Hydro' s rates to increase dramatically. That experience is epitomized by the PERC plant in Orrington. Bangor Hydro buys the power from the plant at rates that are far in excess of what it would cost if the power were purchased on the open market. Hydro has been doing what they can to solve the problems but when those contracts went into judicious, they caused a rate increase so over time, there was an increase to customers around 50%. Even though Bangor Hydro could justify a rate increase, they feel they should do what they can to not have any more. Internally, the company was downsized and did a lot of things to cut back. They are now 20o smaller than they used to be and they serve more people and do more business. They have done a lot to improve the reliability of the system. Bangor Hydro has gone a long way to reduce those non-commercial generator contracts, most recently, the PERC plant. A lot of savings have been achieved by doing this. In order for their strategy to continue to work and for the Hydro to continue to avoid rate increases, the things that are going well have to continue going well. Bangor Hydro is in a difficult situation with their lending banks, the banks lent a lot of money to Bangor Hydro along with FAME so as to buy out some of those high cost power contracts. Since the financial situation put them in difficulty with their banks, Bangor Hydro thought it might be a wise idea to try to increase that position with the banks as quickly as possible. Mr. Briggs mentions that Maine Yankee was also was a factor. Since • Bangor is the corporate headquarters for Bangor Hydro, $70, 000+/- is paid in exise tax every year, which is a legislative problem • because the other communities would like to have a piece of the exise tax also. Councilor Aube proposed changes to the draft resolve. 1) In lieu of $200, 000 it would read $250, 000 because that this the new number of the impact on the budget and 2) Insert "in the operation of buildings and schools" and the "therefore" clause would read as follows: "the City Council hereby calls upon the Public Utilities Commission to reduce the proposed Bangor Hydro Rate Increase to the smallest amount possible taking into account the hardship such an increase will create for our citizens, existing employees, economic development. . ." Dan Tremble (small business owner, Bangor) : Mr. Tremble stated that if this increase goes through, it would mean a $3, 000 annual increase in his electric bill (his store) . Mr. Tremble would not increase his prices, he would have to absorb the increase. In the past he feels that rate hikes have been reasonable and that the Hydro has been a great corporate citizen in Bangor. He would like the Hydro to take into account the affect this increase will have on small businesses. Mr. Tremble feels it is important that the Council speak for the citizens. Committee approved the resolve with the changes suggested by Councilor Aube. 2. Replacement of Bus Base Station • The Bus, Motor Pool and Public Works have shared the same VHF radio frequency. Most of the time this is not a problem but at times it can be if Public Works is busy, particularly during snow or rain storms. Since the bus equipment needs to be replaced anyway, it was looked at the possibility of getting another frequency and that is what is being requested. Federal funds would be used plus local share from the Bus and Public Works . Approved. 3. Executive Session - Legal Issue Canceled •