HomeMy Public PortalAbout09-20-1993 •
PROCEEDINGS OF THE COMMON COUNCIL OF THk
CITY OF RICHMOND,INDIANA,SERVING AS A BOARD
)N Cr'4RGE OF THE OPERATION OF THE RICHMOND POWER&LIGHT PLANT
MONDAY.SEPTEMBER 20.1993
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1 The Common Council of the City of Richmond, Indiana, serving as a Board in charge of the operations of the
2 Richmond Power & Light Plant met in regular session at 7 p.m. Monday, September 20, 1993 in the Municipal
3 Building in said City. Chairperson Brookbank presided with the following Councilmembers in attendance: Elstro,
4 Lundy, Donat, McBride,Parker, Allen, Dickman and Hutton. The following business was had to-wit:
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6 APPROVAL OF MINUTES OF SEPTEMBER 7.1993
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8 Councilmember Allen moved to approve the minutes of the previous meeting as prepared, second by
9 Councilmember Lundy and on-unanimous voice vote the motion was carried.
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11 APPROVAL OF BILLS. INVESTMENTS AND TRANSFERS
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13 Upon recommendation of the Finance Committee, Councilmember Allen moved to approve the following bills for
14 payment,seconded by Councilmember McBride and by unanimous voice vote the motion carried.
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16 Dills Already Paid
17 Payroll and Deductions 218,915.24
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19 Investments Purchased From:
20 Cash Operating Fund
21 Bond Sinking Fund
22 Utility Bond Reserve Fund
23 Depreciation Reserve Fund 1,288,868.12
24 Insurance Reserve Fund
25 Consumer Deposit Fund
26 Cash Reserve Fund
27 Group Insurance Fund
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29 Total Investments
30 Transfer to City in Lieu of Taxes;
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32 Transfer from Cash Operating Fund to;
33 Payroll Deduction Fund
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35 Transfers from Depreciation Reserve to:
36 Cash Operating Fund
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38 Transfers from Consumer Deposit to:
39 Cash Operating Fund
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41 Transfers from Utility Bond Reserve Fund to;
42 Bood Sinking Fund
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44 Transfers from Cash Operating ;
45 Interest and Bond Principal
46 Bond Sinking Fund
47 Cash Reserve Fund
48 Utility Bond Sinking Fund
49 Depreciation Reserve Fund
50 Insurance Reserve Fund
51 Consumer Deposit Fund
52 Interest and Bond Principal
53 End of Month Petty Cash
54 Revenue Bonds
55 Interest Coupons Redeemed
56 57
Bond Coupons
Miscellaneous Bills Already Paid 1,053,615.65
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59 Total Prepaid Invoices 2,561,399.01
60 Total Bills Not Paid 639,440.34
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62 Grand Total 3,200,839.35
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RP&L Minutes Cont'd •
September 20, 1993� -
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1 REMARKS BY CHAIRPERSON
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3 Chairperson Brookbank said she received two letters this past week, both of which deserve attention. One, she
4 said,concerns the amount of money received from RP & L. She said most of the Board wants to do what is best
5 for all employees of the City and that includes RP & L. The second is a resignation from a hard working City
6 employee who has chosen to go to work for RP&L. She added that the bottom line is bettering oneself financially
7 for him and his family and noted that this is an example of why it is necessary for a greater increase in dividends.
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9 REPORT BY GENERAL MANAGER
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11 General Manager Irving Huffman relinquished his time to Councillmember Elstro who introduced Charles
12 Braddock,an attorney licensed to practice in Indiana with an office in Anderson. He is the former City Attorney of
13 Anderson and is familiar with the utility in Anderson. He said he was asked by Councilmember Elstro and other
14 concerned citizens to speak to the Board about the proposed budget and the impact on RP&L ratepayers.
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16 He said Richmond is unique within the utility statutes in that it is the only City in the state where the City Council
17 also serves as the governing body for the utility and it has been that way for many years. He noted that the utility
18 statutes are a complicated set of statutes and they have to be read very carefully because they are difficult and
19 unfamiliar. He said he knows that this Board has governed itself well when he looks at the financial statments and
20 sees that the debt revenue or the debt of bound obligations and other debts of this City are very low.
21
22 Braddock said he was troubled by an April 5, 1993 letter containing a report from what is called the Citizens
23 Financial Advisory Committee,which,on its face talked about a decline in revenue and a decline in population in
24 the City as well as other issues. He said in its summary of an RP& L report, he was concerned that he did not
25 recognize the name of anyone he knew from his tenure in utility law in the state of having any expertise in utility
26 accounting, utility rate making or legal utility experience. He said some statements in the letter concern him and
27 he feels these may have misled Council and may continue to do so causing them to make an improper decision.
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29 He noted one of his concerns was the recently settled rate case in which this utility had to go before the IURC to
30 seek an increase in its base rate for the first time in many years.One of his concerns in the report is the transfer
31 in lieu of taxes which is a separate line item within Section 11 of title 81.53 dealing with the utilitiy-and its funding.
32 Even in the rate case, he said, as it was finally settled by a stipulated order and not by testimony there were some
33 concerns that were raised and identified on the value of how much money RP&L should be paying the city in lieu
34 of taxes. He said the Indiana Utility Regulatory Commission has its own formula for determining how much a City
35 should pay,based upon the net operating revenue of the utility and it will be different for each.City.
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37 In the case which was settled in December, Braddock said,they readily identified by stipulation that$545,816 was
38 the amount that was to be made in payment in lieu of taxes. He added that that is filed on page 7 in that report.
39 However, he said,they talk about a revenue requirement and the Commission accepted a revenue requirement of
40 $822,000. Looking at the financial documents for the City, Braddock said, RP&L has been making a payment of
41 $1.65 million for the past five or six years, an issue that was not raised fully with the Commission at that time. He
42 said because it was not before the Commission and on the stipulated order they accepted the findings of the
43 parties since all the parties agreed to the$822,000, adding that they even accepted testimony:from the.
44 accountants as to the$1.65 million payment as being a reasonable payment. However, he said,the statute very
45 clearly says the money must be in the cash revenue account as of June 30 of the year-in which the transfer is
46 made.He said it is his understanding that as of June 30 of this year there was an account balance of$1.8 million
47 and if that would be exceeded this Board would be going beyond the terms of the statute and in addition it would
48 be going beyond the rule as it is interpreted by the Indiana Utility Regulatory Commission. He cautioned Board
49 members to look at that and be careful about any decisions they might make to go beyond that amount, noting
50 that if they choose to do so,they should do it with extreme caution.
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52 He said in the Citizens Commission report they also made a statement about increasing the City's return on
53 investment to 6.5 percent of gross revenue. He said that is an inaccurate statement and one that he
54 recommended the Board have its counsel to review because it is not gross revenue. He added that the IURC
55 allows a return on investment as a percentage of the net utility appliances and that is determined by the net
56 revenues over the rate base.He called their attention to the rule the Commission has which was in a case that
57 was litigated before the Commission and decided several years ago called the Bainbridge Rule. In that, he said,
58 the Commission clearly set down a return of investment.The return of investment is not owed to the City. It is a
59 test used by the Commission to make sure the Board is properly funding all the revenues to properly meet the
60 obligations to'operate the utility. It also allows, he said,to have reasonable funds available for expansion and
61 updating the facilities. He said for that letter to say a percent of gross revenue is a very inaccurate statement. He
62 further stated that'in looking at the transfer in lieu of taxes that the Board look at not only the two matters that he
63 has brought to its attention but he would also caution the members to look at the fact that they have already made
64 a transfer this past year of.$2.5 million to the City. He added that he did not find that in any of the documents
65 submitted to him in the partial review he was able to make and he would submit to them again,that that could be
interpreted as a transfer in lieu of taxes without other supporting documents from the.City Council to show that
there was a need for a loan,with an approprite time period set forth in the statute and an interest rate reasonable
to the utility ratepayers to-justify such a transfer.
RP&L Minutes Cont'd
September 20, 1993
Page 3
1 He said the issue has been raised as to who is drawn into this when the Board makes its decision tonight. He
2 added that it is not only the taxpayers in the City of Richmond but the ratepayers who go beyond the City. He
3 added that not all the ratepayers are property owners within the City. He said the IURC will look at the action
4 taken as a Utility Board and looking as to how it is protecting the ratepayers, not just the taxpayers of the City.
5
6 Braddock said,the Concerned Citizens of Richmond are questioning severely any actions taken by the
7 Councilmembers serving as an RP&L Board and later as the City Council in which a proposal would be made to
8 transfer more than the$1.8 million which was in the cash reserve fund as of June 30. He said if they do so,they
9 should be sure they have thought about it and sure they can document their actions because if they go back
10 before the IURC any action that they will take with this budget to be reviewed.He added that the action that the
11 Board has received from the Commission in December 1992, in balancing out the services and the cost of
12 services,they will probably be back before the IURC to look at how they're going to treat and balance the utility
13 customer and the individual ratepayers. He said if at that time the Commission finds that there are not sufficient
14 funds to operate the utility there may be severe questions and they might be looking back at the Board's action.
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16 Huffman said he will be taking bids for Continuous Emission Monitoring Equipment and has presented to the
17 Board a program concerning RP&L's requirement to purchase and install the equipment. He added that this has
18 been spelled out by the EPA and all utilties have to meet this and it is important that this equipment be installed in
19 a timely method to avoid penalties. He said the consulting engineering firm of Black&Veach has written the
20 specifications for the bids which will be sent and he would like to receive the bids at the October 5 meeting.He
21 said on the agenda this evening is a motion authorizing him to receive those bids.Councilmember Elstro so
22 moved,second by Parker and the motion was carried on a unanimous voice vote.
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24 In answer to Councilmember Allen's question as to the deadline for having the equipment in place, Huffman said it
25 is January 1, 1995. He said this necessitates duplication of equipment because if it goes down for any reason it is
26 required that the plant be shut down. Huffman read a printed statement. (It is in the RP&L in its entirety).
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28 Huffman said he is requesting that bids be let for a 1994 five-passenger sedan which will be used in the personnel
29 department which furnishes vehicles for several different deparments.The present car will be made available for
30 use by the meter readers.He noted that on the agenda is a motion to authorize him to receive bids,adding that
31 he would also like to have those by the October 4 meeting.Councilmember Elstro so moved,second by
32 Councilmember Parker and the motion was carried on a unanimous voice vote.
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34 Huffman commented that he had been distrubed by some of the information that had appeared on the
35 Palladium-Item's editorial page about people not knowing something concerning the case with the Federal
36 Government. He noted that this case has been going on for many, many years and had been discussed prior to
37 several people leaving this Board. He noted it is a very complex issue in some areas and a narrow tunnel issue in
38 others but invited questions from the public concerning this case or any other they might question.
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40 Answering a question by Councilmember Allen, Huffman said that initially there was a particular emission level
41 and RP&L was led to believe this was an adequate level,then came the unrealistic levels. He said the state has
42 agreed verbally with RP&L and it is submitting that and it is being changed. He said the state gave them a very
43 tight schedule that RP&L can make and it is backed up by test data.
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45 He said he feels that when the state's request has been accepted and it submits its plan it should negate the
46 EPA's request.Councilmember Allen asked if the tests were conducted and Huffman said they had been.She
47 noted that that was in 1988,then in 1990 they go back to the.04 and .07 figures,and now,two years later,they
48 are saying to go back to the old formula. Huffman said they didn't grant a permit in the interim time,however,their
49 practice is not to grant new permits but the utility operates under the existing permit until a new one is issued.
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51 The original permit, Huffman said,did not have those lower values. He said they issued RP&L a new boiler
52 permit with the new standards in 1990 and issued the permit at that time with the new standard levels.Huffman
53 asked the state who picked out those numbers and no one could be found who would take credit for them.
54 Huffman said all the required tests have been conducted,adding that they are very expensive and have to be
55 done by outside sources.They have to be taken at the 250-foot level of the stack which requires qualified people.
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57 Councilmember Allen asked about the LIPAC project as to whether or not it could that be a detriment to the
58 standards, although the state has granted a variance of those figures durng those tests. Huffman said the
59 Richmond plant is not just a local issue but a worldwide project.He said papers will be submitted to a work
60 conference in Boston concerning LIPAC,and he attended one in Atlanta, and it is going to be presented to an
61 EPRI conference in Buffalo and next month in Budapest to a world European conference. Huffman said the EPA
62 likes to see pressures put on a utility, making it a little tougher than what they can meet. He said they have the
63 feeling that they're trying to hurt somebody and the dollars don't register with them.
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65 Councilmember Allen said in talking about the payment to the City she heard them say that they did not monitor
anything about what the City paid as a return on investment to the City. She added that doesn't mean they
wouldn't take that in consideration in the rate case.They did say they didn't care what we did with the money once
the ratepayers are settled.She added that she understands that the Board is out is to protect the ratepayers and
that is what she really heard from the Commissioners.
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- RP&L Minutes Cont'cf
•Septenfber 20, 1993 • •
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1 Huffman said Councilmember Allen did not have the proper audience. He said if you ask the question about how
2 much can be transferred to the City,staff people will say you can do whatever you want since you have complete
3 control of RP&L funds.You can give benefits to the ratepayers or you can give them to the taxpayers. However,
4 he said, as Braddock pointed out,when you go back for a rate case there will be an inquiry as to what you did. He
5 said this last time RP& L was very careful to keep lieu of taxes out of the rate case and it never became an issue.
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7 Councilmember Brookbank asked Milligan if he had heard of any action by the Department of Justice.He said there
8 was no indication that it is backing off the complaint that he wouldn't want the Board to be misled by Huffman on
9 that point. He added that he had discussed the rate case with the attorney in Indianapolis and he indicated the
10 areas where RP&L tread lightly had to do with the reserves all ready for depreciation, replacement of plant
. 11 working capital and ready funds. He said if the IURC had gone into those figures it would have been apparent that
12 no rate increase would have been justified in 1992. He said that Huffman's characterization of what happened in
13 the rate case in his statement this evening is absolutely in error and it is an outrage for him to continue to try to
14 mislead this Council and this community. He added that RP&L is owned by the citizens of Richmond.There are
15 taxpayers throughout many communities in this county and they do not own it and ratepayers do not own it,the
16 citizens of this city own it. He said this Council,which is inconsistent with what Braddock said, has the control over
17 the funds of this utility and it is within their power, according to your rate case less than a year ago,to transer as
18 much as$4.2 million.What is bang requested, he said, is less than that and what is being acted on this evening will
19 be considerably less than that,but it is$545,000 in the measured period of April 1, 1991 to March 31, 1992.
20
21 The actual computation of the payment in lieu of taxes, Milligan said, has been furnished to Council and is based
22 upon the tax rate. It is based upon the dividend assessment and the replacement tax credit and has been
23 calculated.He said based on last year's figures from RP& L's audited statement from the State Board of Accounts
24 it would have been$545,277 and the return on investment,based on the IURC's formula would have been
25 $3,659,745 for a total fund available for distribution of $4,205,021. Huffman responded that the Board had heard
26 the views of two different attorneys tonight and the members would have to make a determination which comments
27 to accept. He urged them, if they still had doubts,to seek information from other qualified sources.
28
29 Braddock said he took strong exception to Milligan's statements, noting that the return on investment statement he
30 made is not one that he can find in any of the utility statutes or any other cases presented to the IURC. He said the
31 $3.65 million is not something that can be transferred to the City. It is for the plant operation and that is very clear in
32 the utility statutes.As to the ownership, Braddock said,when the utility was established it was done with a revenue
33 bond generated by the ratepayers. He said there have been cases litigated where the courts have looked at where
34 the revenue source is whether they come from general obligation bond issues or revenue bonds. He said he felt
35 that he and Milligan could go through the law books and find there could be a serious question as to the ownership
36 but the issue tonight is the transfer of funds. He agreed that the$545,000 is correct and noted that the current rate
37 of$822,000 was acceptable to them.Addressing Councilmember's Allen's comment about not questioning what the
38 City has done, he said unless it was raised as an issue in testimony they would not decide it at the time. He said he
39 strongly disagreed with Milligan's statement on this issue.
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41 In answer to a question by Councilmember Donat Braddock said his experience in utility law goes back to 1980
42 when he was City Attorney and Corporation Council for the City of Anderson. In that capacity he represented the
43 Anderson Light and Power for.7 years. He also served as that City's representative on IMPA,was involved in the
44 drafting of the power•agency formulation documents. He said he was familiar with Richmond,doing research of the
45 generation of electric power and had come to Richmond several times to study the generation facilities and had
46 reviewed contracts and agreements made with IMPA. In response to Councilmember Donat's question as to his
47 utility experience, Milligan said the Mayor appointed him as City Attorney and he would be happy to meet with
48 Braddock but it is obvious that he has not read the order in full and not studied the documents and not traced the
49 history of RP&L. •
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51 ADJOURNMENT . •
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53 There being no further business,on a motion duly made,seconded and passed the meeting was adjourned.
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60 Jane Brookbank,Chairperson
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65 ATTEST: •
• Norma Carnes, City Clerk