HomeMy Public PortalAbout07-01-1974 PROCEEDINGS OF THE COMMON COUNCIL OF THE
CITY OF RICHMOND, INDIANA, SERVING AS
A COMMITTEE IN CHARGE OF THE OPERATION OF THE
RICHMOND POWER & LIGHT PLANT, JULY 1 , 1974
The Common Council of the City of Richmond, Indiana, met in regular
session July 1 , 1974 at the hour of 7:00 p.m. in the Council Chambers
in the Municipal Building in said City serving as a committee in
charge of the operation of the Richmond Power & Light Plant. Mr.
Merchanthouse presided with the following members present: Messrs.
111 Brown, Cornett, Elstro, Geier, Marino, Mills, Shields and Williams.
Absent: None. The following business was had to-wit:
Mr. Mills moved to approve the minutes of the previous meeting, seconded
by Dr. Shields and on unanimous voice vote the motion was carried.
Mr. Cornett moved to approve the bills, seconded by Mr. Geier and
on unanimous voice vote the motion was carried.
APPROVE THE FOLLOWING:
Bills in the amount of $212,359.01
Interest Coupons None
1 Payroll 64,083.97
Irving Huffman, General Manager, requested authorization to award bids
for Group one wire to Westinghouse Electric in the amount of $4,123.47
and for._Group 2 Hardware to Griffin Electric in the amount of $5,709.35.
Mr. Cornett made the following statement:
Although I have continually supported expenditures of this type in
the past, I cannot, in good conscinece, continue to do so while the
utility continues to operate : in deficit position. In retrospect
had I envisioned the magnitude of the seriousness of the current
financial situation I would not have supported other recent expendi-
tures. I realize an explanation can be given that this money comes
out of a separate fund and it's OK to spend it. Well , I just can't
buy that argument anymore than the average citizen can. There just
has to be ways to legally approach the sensible use of all funds.
It just doesn.t make sense to anyone to be pouring out large capital
expenditures at a time when you could be going broke. I think
we should spend more time and effort on restructuring the present
rules and regulations on income and expenses control rather than
continue to blindly dispense funds just because we have some extra
money in a particular account. I also realize not following through
with this project might have some affect on providing adequate service
for the Northwest Industiral area, however, priorities must be
established and I think the first priority should be to get the
utility on a sound financial basis now or we won't need to worry
about furture service.
Finally, I personally cannot criticize everyone else for installation
of ugly overhead lines elsewhere in the city and then turn right
around and endorse these plans as the only viable alternative. I
just can't buy that or support it in good conscience.
So, I am opposed to this expenditure and. I will continue to be
opposed to all capital expenditures until the current financial
crisis is corrected.
Mr. Marino said he thought this body was trying to do the best they
could to keep expenses down.
Dr. Shields said you have to keep the organization working until it
gets out of the red and I think we will do this.
Mr. Merchanthouse said he feels there is a total disregard for people
and trees and we should put a map in the paper and show people where
this overhead power line is going to be.
RP&L Minutes
July 1 z 1974
Page 2
Mr. Geier stated past experience has shown that it is necessary to have
a cash depreciation fund.
Mr. Williams said it is in the best interest of the people to keep the
utility municipally owned.
Mr. Brown moved to authorize Mr. Huffman to award bids for 69IV Wire to
Westinghouse Electric in the amount or $4,123.47 and for hardware to
Griffin Electric in the maount of $5,709.35, seconded by Dr. Shields and
on a call of the roll the following was recorded: Ayes; Brown, Elstro,
Marino, Mills, Shields, and Williams. Noes; Cornett and Merchanthouse.
The vote being seven (7) to two (2) in favor of the motion.
Mr. Huffman read the following statement:
Due mainly to Indiana and Michigan Electric Company's 50% plus
increase in cost of wholesale power sold to Richmond Power and Light,
RP&L is preparing to petition the Public Service Commission of Indi-
ana for a two stage rate increase over the next 6 month period totalling
approximately 15%. RP&L plans to refund to consumers any future
I&M overcharges when the Federal Power Commission finally establishes
the proper rate.
In the first stage, RP&L is seeking an immediate 10% flow through
rate increase to offset the 50% I&M increase. Also I&M has placed a
new interpretation on our existing contract, in that we must take or
pay for more power than needed. This in turn does not allow RP&L
to utilize our own generating equipment, and as a result increases
our own generating cost. Indiana and Michigan Electric Company, owned
by American Electric Power Company has also in effect blocked RP&L
from selling any of our excess power to other utilities. We were not
even allowed to sell to east coast utilities coal-fired electrical
power during the severe oil embargo, in order to help the nation
conserve fuel oil .
Our rate case with I&M is now over 2 years old and it appears the
• Federal Power Commission will take another 6 months to make a ruling.
After that, appeals to the courts will take another 6 months to 1 year.
All during these past 2 years I&M has refused to negotiate and settle
any differences.
We can no longer absorb these costs and we must seek to pass them
on to our consumers. Upon receipt from I&M, RP&L proposes to refund
to our consumers those overcharges made after the increases, less ex-
penses. We feel the I&M overcharges in rates alone are in excess of
$60.000 per month. Other overcharges and damages will be determined
at a later date.
In the second stage Richmond Power and Light is also preparing to
file, as soon as possible, a standard rate case with the Public Service
Commission of Indiana. We will perform a complete cost-of-service
study and propose to re-adjust our rates so that all consumers will
pay their fair share rate. Presently we feel some rate payers may
be carrying more cost-of-service burden than others. It probably will
take 6 or more months before the Commission will hear the second peti-
tion. Depending on our studies, the second increase may average 5%.
Some of the more important reasons for this increase are to meet
our bond obligations and also offset the severe jump in material
and supplies cost. 11/
This year we are projection an increase in labor cost. Each
year our employees wage rates and salaries have been increasing on par
with the electrical utility industry. For the first time, we expect
our payroll to exceed the 1968 total .
RP&L Minutes
July 1 , 1974
Page 3
(Mr. Huffman's statement continued. )
During the past 5 years we have been on an effective labor savings
program, and as a result we have kept our total labor costs about
the same each year.
The total operating costs have been increasing; however, sales of
electrical power remain about the same as last year. With more con-
sumers and industries switching to electric energy, we are ex-
pecting revenues toincrease during the next year, but not sufficiently
to offset a need for a rate increase.
The proposed increase will only be the second for RP&L in the
last 20 years. One of Indiana's privately-owned electric ..companies
has received its second increase and a second company has filed for
its second increase. It appears the three remaining companies will
file either late this year or early next year.
The entire electrical power industry, and most other energy
industries are all faced with sharp increases in cost and reduced
load growth rates. Unfortunately rate increases are necessary.
Mr. Williams said he is not in favor of the rate increase, but knowing
the situation as it is realized there isn't much choice.
Mr. Cornett made the following statement:
Unfortunately I could not attend the meeting at which this issue
was discussed in detail , however, I have been briefed on the meeting
by other Councilmen and I do have the printed information disseminated
at that meeting.
In spite of the strong arguments presented by the management of the
utility and its attorney, I am still not convinced that a rate increase
is the only solution to the current crisis. I like some of you have
been critical of vitrually all the utilities who continue to dole out
hundreds of thousands of dollars for computers, office buildings ,
collection centers, advertisements, additional personnel , paved roads
and parking lots, etc. and then simply raise the rates through
a utility dominated Public Service Commission to cover these costs.
I know the old argument comes out again that these moneys come out
of a separate pot and therefore it's OK. Well as a citizen I know all
the money comes out of one pot, the customer's pot -- yours and mine.
And a system that allows what is happending not only in this rate case-
and utility but others locally and elsewhere is not fair and .ought to
be changed.
What kind of a country would we have if as one individual all I had
to do when I ran out of money was to tell the boss or the government
and say, "Hey give me a raise I 'm out of cash. " There just has to be
other alternatives that can and should be explored. Maybe we should
buy more power and generate less. Maybe we should buy more power and
generate less. Maybe we should stop paying a divident. Maybe we
should cut back service or personnel . I don't really know, but I
think every avenue should be completely explored before we advocate
raising the rates.
Don't we owe it to our customers, those we represent, to at least
pursue re-writing the rules and regulations in order to get some
finanacial relief before we sock it to 'em with a rate increase.
RP&L Minutes
July 1 , 1974
Page 4
We know we have cash available in other funds that can't be touched
due to these unfair regulations. Another point I think is very pertinent
but as yet unexplained, is where would this rate increase put us in
relation to rates paid in other cities. I 've been told "What difference
does it make? We have to set the rates on our situation, not someone
else's" . Well , I can't see why its relevant to compare tax rates ,
salaries , and virtually everything else but it's not relevant to compare
electric rates. You better believe an industry is going to check out
rates before it locates in a community.
I was told by a guy last week that he was amazed how much cheaper
his utilities were going to be out on the East Coast where he is moving
in comparison to rates here, the East Coast where everything is supposedly
sky high! I 've also been told we're not as competitive in the midwest
as we ought to be, I donut really know, I 've never seen a comparison.
Therefore, since I feel all avenues have not been adequately explored
in an effort to avoid an increase and since I don't think I have enough
information to make a decision on an issue as vital as this one is , I
cannot support it.
Dr. Shields said local residents are victims of Congress ' deficit spending.
Mr. Mills aid the boast is hard on the customers.
Mr. Elstro said costs have not been cut and perhaps the system should be
checked.
Mr. Marino moved to grant permission to Mr. Huffman to engage the firm of
Haymaker, Hirsch, and Fink to prepare and petition the Public Service Com-
mission of Indiana in behalf of Richmond Power & Light for electrical rate
increases, seconded by Mr. Mills and on a call of the roll the following
was recorded: Ayes; Brown, Geier, Marino, Shields, Williams and Merchant-
house. Noes; Cornett, Elstro and Mills. The vote being six (6) to three
(3) in favor of the motion.
There being no further business on motion duly made, seconded and passed,
the meeting was adjourned.
Greg Merchanthouse
Chairman
ATTEST: Margaret Mellen
City Clerk