Because of the disadvantages listed here, I have harbored an inclination that GP&L and the ratepayers might be better served by an independent board. I stated as much at the last Council work session and posted that opinion here. I want to stress that it is an inclination based on the information that I have and that I would not vote for such a board until I knew more facts, such as how it would be structured, the pros and cons, what other cities offer positive models and which offer negative, and, most importantly, what do the citizens want?

Should Garland decide to create an independent electric board, the move would need to be in steps. Look where we are now, look where we want to go, develop those steps necessary to move in that direction. Each step should be a system-check, are all systems go?

Understanding what the end might look like, the terminus of such a move, is an early hurdle. Here is more from the paper by Mark Zion that I introduced yesterday:

 

INDEPENDENT PUBLIC UTILITY BOARD

 

A municipal utility that is set up as an independent utility authority organizationally is often quite similar to a municipal utility department which was described above. The organizational structure can range from a structure in which all of the utility functions are included under the jurisdiction of the independent board to some of the services still being provided by the city government under the jurisdiction of the city council. For instance, even in the independent authority structure, support functions such as fleet maintenance, information systems, and personnel may continue to be provided by the government side of the city.

 

It should be noted that most larger municipal utilities are operated as independent boards. Typically independent utility authorities are stand-alone organizations with all of the functions necessary to plan, design, construct and operate the utility organization reporting to the independent board and its manager.

 

Independent utility boards generally have anywhere from four to eleven board members with five to seven being quite common. Board terms typically range from two to five years. Utility board members can either be elected or appointed. *** Often, elected utility boards are more political than having the city council serve as the policy making board.

 

Like city council governed utility systems, independent utility boards have both advantages and disadvantages. Some of the key advantages and disadvantages are listed below:

 

Advantages

• Appointed utility boards are typically less political and may, in the face of political pressure, be more likely to make decisions based on business and economic considerations. However, due to their role in setting rates, borrowing money and approving budgets, utility boards, nonetheless, remain powerful political forces in the communities in which they serve. The appointment of utility board members tends to be a fairly political process.
• Allows more focus by the policymaker on utility considerations.
• Allows more of a business culture to evolve due to the separation of the utility and city government functions.
• Allows explicit representation of various segments (i.e., outside city limits ratepayers, business community, etc.). It is not unusual for there to be implicit or explicit policies requiring the makeup of appointed utility boards. It is not, for instance, uncommon to require that members be appointed from outside the city limits to represent the utility's non-city ratepayers.
• Allows appointment of board members with appropriate technical/business backgrounds. Again, city councils often have either explicit or implicit criteria that have been set to determine the required capabilities of board appointees.
• Improved long range stability. It is not unusual in the appointed utility board setting to have board members serve for five to ten years. Consequently, there tends to be more stability and policy setting in the utility board environment.
• Creates better checks and balances in regard to transfer of funds from the utility to the city. Often transfer policies are clearly defined and are based on the profitability of the utility and consequentially its ability to transfer funds to the city. More importantly, it takes the city council, which is responsible for balancing the city's General Fund budget, out of the process in determining how much money should be transferred from the utility.

Disadvantages

• Appointed boards are not as accountable to the voters as elected policy makers. Utility boards, however, tend to be very responsive to a community's value system.
• Can result in inefficiencies by the creation of separate and duplicate city support functions.
• The city, as owner of the utility, loses a degree of control over its most significant asset.
• Significant start up costs associated with the creation of the utility authority. In many cases, the creation of the utility authority requires refinancing and defeasance of the utility's outstanding debt. In addition to the legal and advisory costs associated with this transaction, depending on the utility's overall debt structure, such a refinancing could result in increased debt service. Additionally, creating the authority may require legislative action at the state level to amend the city's charter and/or create the charter for the independent board. All of these steps carry with them significant time and cost considerations.
• Does not necessarily result in a lower cost of providing utility services.

As in a municipally-owned and operated utility department, independent public utility boards offer a wide range of rates from low to high. As is the case with municipally-owned and operated utility departments, rates are most significantly influenced by power supply and fuel arrangements. For instance, the Sebring Utility Commission (an independent utility board) had some of the highest electric rates in the nation. As a result, it sold its generating, transmission, and distribution facilities to IOUs [Investor-owned Utilities]. The high rates were singularly attributed to the construction of excess and high cost generating capacity. As in municipally-owned and operated utility departments, utility boards are often influenced by community values to make decisions which ultimately impact rates.

 

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Comments:

Comment from: Les Cook [Visitor]

Mr. Athas, the GP&L problems need to be addressed now. The Garland Elected Officials ARE by law the responsibile Board of Directors of GP&L and have many Policy Issues to address before the GP&L Budget is complete. How can a responsible Elected Official approve a GP&L annual Financial Plan without reviewing the current rates AND THAT CONSULTANT REPORT? Last year was your first year to be an Official controlling GP&L and maybe, with a little strech, one could excuse your failure to address the GP&L budget, rate & other issues. Councilman Feagin was the only Elected Official that correctly questioned why the GP&L budget wasn't receiving a public discussion. He was quickly stopped in his tracks by you and the other Officials, it appeared to me. Some were probably innocent in what was taking place, in my opinion. But, now one year later with what has happened (the public doesn't know all the secrets), but some can smell a rotten smell when the Utility Director, Auditor and others have left town. And other evidence of problems is surfacing. I do appreciate your biased views on GP&L and all the other topics. I do feel most of your blogging is Official City business representing millions of Citizen dollars that will require your Official vote in a short time. Wouldn't it be better for the public interest for you to present your ideas at Open Public Meetings. Or is your Blog a Council meeting place? Just my opinion.

08/15/07 @ 14:24

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