City manager addresses citizens comments from public hearing

Published 10:15 am Wednesday, June 26, 2013

FRANKLIN—During his City Manager’s report at Monday night’s council meting, Randy Martin addressed several citizen comments made at the June 10 public hearing regarding the 2013-2014 budget.

At the public hearing, Dr. Linwood Johnson, spokesman for the Concerned Citizens Against High Utility Bills addressed the council about the budget’s electric fund. He asked council to consider lowering the profit margin, saying Franklin’s is 88 percent and that Dominion Virginia Power (from which City Council purchases power) is held to a standard of 10 percent.

Speaking Monday night (June 24), Martin said that he and city council reviewed comments during a recent work session and felt more information needed to be distributed to the general public.

In regard to Johnson’s comment, Martin said the ‘profit margin’ or really money in lieu of taxes that is transferred to the general fund during the current fiscal year (2012-2013) was 9.62 percent.

“We have analyzed historical information and determined (the 88 percent comment) is not the case.” He presented a chart that shows the Electric Fund transfer to the General Fund from 2008-2009 was 13.32 percent; 2009-2010 was 12.84 percent; 2010-2011 was 11.49 percent; and 2011-2012 was 10.77 percent. The budget council just adopted will include a transfer of 9.37 percent.

He said Council has an adopted policy on this matter and that council has targeted between 8 and 12 percent as the amount to be transferred and had requested it be in the 10 percent range. Martin said while the transfer amount had gotten above 10 percent in several past years, it has steadily decreased to below 10 percent over time.

The other piece to this transfer is the cash balance that needs to be held in reserve, he said. Again, city policy requires council to establish a range or minimum level of what the electric fund cash reserve should be.

The cash reserve is used in the event of a storm (i.e. hurricane) or normal wear and tear on the system. Money set aside in the reserves is used for replacement of equipment, upgrades to the system and quick response to customers. He indicated that about $1.3 million is a minimum level and that between $2 and $2.2 million is the optimum level. “We need to have adequate funds for a major occurrence,” he explained, adding that it will take the city between three and four years to reach that optimum level.

Another citizen comment Martin addressed Monday night concerned residential electric rates during winter and summer. In a chart showing residential summer vs. winter rates, in April of this year when a new fuel adjustment took place the summer rate is 11.59 cents per kWh; the winter rate was 10.98 cents per Kwh; for a weighted average of 11.18 cents.

Franklin Power and Light Director Mark Bly came forward to explain the rates. He said the lower winter rate was put into effect to help citizens. Winter rates are from October to May and summer rates are from June to September. He said Franklin is a “winter peaking utility”.

With the proposed two percent increase to the base rates and including the fuel adjustment; the rates will be 11.78 cents per Kwh for summer; 11.16 cents per KWh for winter; for a weighted average of 11.37 cents.

With the proposed 0.8 percent increase in January of next year, the rates will be 11.85 cents per kWh for summer and 11.23 cents per kWh for winter; for a weighted average of 11.41 cents.

Martin said this showed “less than a penny difference between seasons for the service customers receive.”

He said customers could calculate their bills by multiplying the weighted average by the total kilowatt-hours used.

Martin and Bly presented another chart comparing the Franklin Power and Light rates to Dominion Virginia Power and Community Electric.

In January of 2013, Franklin’s rate per 1,000 kilowatt hours was $109.37, compared to Dominion Virginia Power’s at $107.22 per 1,000/kw hours and $118.75 for Community Electric.

In July 2013, with the proposed 2 percent increase, Franklin rates will be $113.67 per 1,000 kWh; Dominion Virginia Power rates will be $110.75; and Community Electric $118.75.

Vice Mayor Barry Cheatham maintained that averaged over three years, Franklin’s rates were lower. Bly said, “It is always our goal to stay under our nearest competitor. Some years we’re lower and some higher, but that is our goal.”

Martin reiterated that having updated numbers, since January 2011, Dominion Virginia Power has put increases on wholesale power of 24.5 percent. The customer has not seen but 19.8 percent of that increase. “We have not passed through the entire amount,” said Martin. In other words, the city has used cash reserves to subsidize the costumer to keep the rates as low as possible.

It was further mentioned by Councilman Benny Burgess (Ward 2) that when a new contract was negotiated with Dominion Virginia Power, credits were taken away which had to be absorbed by the city as well.

When questioned by Councilman Greg McLemore (Ward 3) about negotiating the contract, Bly said the seven-member group Franklin is a member of, Virginia Municipal Electric Association (VMEA), spent four years negotiating the last contract and that Dominion was the most cost effective.

And finally Martin mentioned a comment made at the public hearing implying an economic development opportunity was missed because of the city’s electric rates. “I am not aware of this and would be interested in knowing what project this was” and said he would provide a response when he received accurate information.