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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