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On April 1, the city's wholesale electricity supplier, the Municipal Energy Agency of Nebraska (MEAN), is raising its rates 9.75 percent. Delta is one of 60 communities in Colorado, Iowa, Nebraska and Wyoming served by MEAN.
Steve Glammeyer, the city's utilities director, was present at the MEAN board meeting when the rate increase was approved. At a work session Feb. 19 he told city council members he voted against the rate increase, as the city's representative, because it included salary increases for all employees. MEAN staff said the higher cost of generating, transmitting and purchasing electricity justifies the increase.
In planning for 2013, Glammeyer said he budgeted a 5 percent rate increase. Instead, the rate increase is twice that and MEAN has indicated it will be seeking a similar-sized increase next year. The city will likely be looking at a rate increase then as well, Glammeyer said.
Glammeyer returned from the board of directors meeting with another piece of bad news. Through no fault of the City of Delta or any other entity served by MEAN, the power provider has been assessed a $15 million fine for improperly using the Southwest Power Pool's integrated power service. In other words, Glammeyer said, MEAN was moving energy incorrectly and was fined for a tariff violation.
MEAN is currently negotiating a settlement in the amount of $6.3 million. Glammeyer said he voted to accept the settlement, rather than pursue the matter through costly litigation, because he doesn't believe MEAN would win.
The fine will be divided among MEAN members, with the city's share totaling $158,487.07, to be paid over five years. Beginning April 2014, the city must remit annual payments of $31,697.41, which could also impact rates for city customers.
"While we did nothing wrong, we're a member and we are financially responsible as a member," Glammeyer said. "We don't have a choice."
There is some indication MEAN knew of the problem earlier than staff let on, but ignored the warnings. Glammeyer said the matter of accountability needs to be addressed. After discussing the matter with city manager Justin Clifton, Glammeyer said he plans to convey "some pretty strong feelings from the city" at the next board meeting.
During the work session, the territory and acquisition of facilities agreement with DMEA was also addressed. An agreement which was in place for many years expired, which wasn't an issue until Maverik came to town. In lieu of an agreement with DMEA, the city followed state statutes which allow for the purchase of facilities and outline how the seller is to be compensated for lost revenue and future development. Under a provision of those state statutes which allows for competition, the city submitted a bid to provide electric service to Maverik, as did DMEA. After weighing both bids, Maverik chose the City of Delta.
"That clause in the state statute caught DMEA a bit off guard," Glammeyer said. "That spurred them on to say maybe we ought to have an agreement." DMEA was asked to submit a proposal, which Glammeyer said was very one-sided. The city is in the process of crafting a counterproposal.
That proposal divides the city into three areas, the first served by the city. One portion can continue to be served by DMEA under a franchise agreement which requires DMEA to remit 5 percent of its revenues to the city. In the third area, the city reserves the right to acquire facilities and compete for new development as allowed under state statute.
"The intent is to come up with something that is fair to both sides," Clifton said. "We are trying to preserve each organization's investment in infrastructure and ability to realize efficiencies."
Ultimately, however, Clifton said he wants to make it clear that it is the city's goal to one day acquire [through purchase] every customer in the city limits. "We don't try to hide that fact," Clifton said.
The city's proposal has not been presented to DMEA, Clifton added, but "conversations are happening and we want to make sure council is up to speed."
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