Friday, June 27, 2014

No HL&P Rate Increase - (for now)

In a split decision, the Board of Directors for Heber Power decided NOT to approve the proposed 4.5% increase in electricity rates.

Starting the discussion leading to the 3-3 defeat of the motion, Chair Alan McDonald, Mayor of Heber, made an impassioned plea to crowded board room for passage as necessary to continued operation of the public utility.  He also made pointed comments towards his two appointees for releasing information for 'political' purpose.  He had been very quiet for most of the meeting up to that point.   A substantial number of ratepayers were in attendance.

Unsure of his meaning, Heidi Franco and Kelleen Potter, of the Heber City Council, replied they were simply looking out for the ratepayers, the ultimate owners of the utility.  Both indicated they have been frustrated in their attempts to gather financial and operating information, they felt was necessary to fulfill their duties.

They have called for managerial and operating changes to rectify some recent problems with fraud and bad publicity which had lowered the company's credit rating and had led to distrust in management capabilities.

 Earlier in the meeting, they had questioned the issuance of bonus payments to management and excessive pay and benefits and called for what they felt were needed corrections.

Midway Mayor, Colleen Bonner, called for passage of the increase and emphasized they were a new board and were work hard to make changes and patience while they worked though the problems.  County Council Chair, Jay Price agreed with the need for an increase.

Bob Kowallis, Charleston Mayor, became the swing vote decision maker, by declaring, 'the proof is in the pudding,' and he needed to see more action before approving any more revenue.   He further called for a budget and expense review in the near future.  That idea was accepted to be discussed in the next meeting.

The mechanics of the propose rated increase, which has raised some questions was not discussed.   Mr McDonald stated they had the required Public Hearing a month ago and everyone had enough time to review it.   The WTPA (Wasatch Taxpayers) held a meeting on Tuesday to discuss the rate increase, more information from that meeting here

An earlier financial report by the new CFO, Bart Miller, indicated that costs were rising and power cost were out of their ability to control as were current wages and benefits.   In answer to questions, he stated that, yes, bonuses had been or were being paid.  He said they were doing their best to control costs.   Kowallis said, it doesn't take to many 10's to make 100's and there was room for reductions.

The first hour or so of the meeting was spent on bond explanations, with a lot of questions, mainly from Franco on interest rates, debt philosophy and bond costs.  The bond expert from GKB explained that the decisions were made by the board, and a budget 'cap' on payments had been made of $700K per year requiring longer terms for the debt but judicious management and save a lot of money, despite costs and the longer terms.  

That conclusion seemed to be questioned by some and opinions were expressed that debt should be paid off as soon as possible.  The bond team responded that might be difficult because of the characteristics of municipal bonds in general and the specific particulars of the bonds themselves,

A discussion was also held on the effects of the lower bond rating, ranging from 'it's not really that important' to 'it will raise interest rates for future loans.'   Later in the meeting it was mentioned that more bonding may be required in the near future,

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