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Economic Development Advantages of Municipally-owned Utilities

Economic Development Advantages of Municipally-owned Utilities. Utilities are Key for Development. Municipals Control Their Own Destiny Can Decide Where and When to Extend Utilities Control your rates, charges and some measurements. (ie-kW demand, kVar charge, line extension).

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Economic Development Advantages of Municipally-owned Utilities

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  1. Economic Development Advantages of Municipally-owned Utilities

  2. Utilities are Key for Development • Municipals Control Their Own Destiny • Can Decide Where and When to Extend Utilities • Control your rates, charges and some measurements. (ie-kW demand, kVar charge, line extension). • Do Not Need to Make a Profit or Pay Taxes

  3. Traditional Municipal Utilities • Water • Sewer • Electric • Natural Gas • Telecommunications

  4. Local Economic Impact • Local Jobs (employees) • Larger portion of utility dollars remain in the community versus being sent to stockholders around the world. • Lower prices mean more money remains in the municipality. • Assistance to the City (PILOT, other) • Billing Costs spread over more utilities, etc.

  5. Local Economic Impact • Utilities in vicinity lower their prices. • Joint Pole Agreements ($15 to $30 pole year) • Efficiency of four or five utilities being installed simultaneously • Vehicle and equipment purchases from local businesses • Location of fire hydrants to help lower insurance rates

  6. Grow Your Town through Pre-Annexation Agreements • Provide Water Service (where legal) outside of your town, and provide a clause that the customer will be annexed at the City’s discretion. If customer does not want to annex in now, put clause that customer will be annexed in “in X years”. • Provide Natural Gas Service (where legal) under the same terms. • Village of Freeburg example

  7. Natural Gas Advantage • Municipal Bond/Prepay- Can do long-term purchases at a discount to the local index. • Like a buyers club card whereby you can get ten gallons of gasoline each month for $.40 per gallon off of the price on the pump.

  8. Telecommunications • Broadband over power lines • Ability to run fiber and fiber backbone throughout your community • Ability to lease or provide bandwidth to municipal facilities, schools, libraries and other governmental entities. • A town without high speed data transfer capabilities will be like a town in the early 1900s that did not have electricity.

  9. Natural Gas Pipeline Advantages/Disadvantages • In some cases a municipality is advantaged or disadvantaged by which pipeline it is on. • Large utilities purchase from several pipelines (with focus on the cheapest) so you get the average of the cost. • Municipals on low-cost pipelines have an advantage.

  10. Energy Efficiency • Municipal Utilities can customize energy efficiency programs to meet the specific needs of the customers. • Makes facility more modern and competitive. • Shows local commitment to the company.

  11. When Electric Price is a Major Factor for a New Industry • Customer Insists on Electricity at 4.5 cents per kWh • Utility determines the “expense gap” to provide that service. • City proposes a special rate for the customer that will provide 4.5 cents per kWh for three years (based on the projected usage). • Proposal is for a demand and energy rate that specifically meets the proposed usage level for a fixed time period. State specifically usage from “say” January, 1, 2012 through December 31, 2013. • Municipal runs calculations of what the cost of service would be and then backs in to how much extra money will be needed to make up the cost of service versus the sale price of the electricity.

  12. Raise the delivery voltage to as high a voltage as possible to reduce expense and line losses. Meter location flexibility? • Do not offer other incentives (ie, free land, line extensions, CDAP for roads, etc. • Use CDAP for electric line extensions • Deed “free industrial park land” to the electric utility. The utility sells it to customer and puts the money in a fund to subsidize the electric bill.

  13. If Up-Front Costs are Important • Reduce or Eliminate “Up-Front Costs” for Line Extensions • Council develops a new rate whereby the customer can choose to either be on the standard city rates and pay for the line extension or be put on competitor’s rate until the increment pays off the line extension. • Works for “Gas, Electric, Water , Sewer and Telecom”.

  14. Simplistic Rates are Best for New Projects • Prospect “fears” uncertainty. • Keep Terms Simply and Easy to Understand (especially for Foreign Accounts) • Summarize terms and give an estimate of a final cost per kWh. • Fixed monthly credit to bill is better than a rate discount. Can see it on bill.

  15. Electric Reliability is Important • Plastics harden in Molds • Computers don’t work • Material is scrapped • Frozen products thaw • Some stores base staffing on prior year same-day sales • Scientific Experiments are ruined • Pay “hundreds of employees” to stand around • Can be a fire hazard or safety issue

  16. Reliability Advantages • SAIFI- The number of times an average customer on the system loses power for one minute or more. • CAIDI- For customers losing power for one minute or more, the number of minutes on average that they were out of power. • CAIFI –For customers losing power for one minute or more, this is the number of times that they were out of power on average.

  17. Locally-Based Crews • Local Crews mean shorter response times. • IOUs moved to Regionally-based system • Local Crews know the area and the system • Equipment stored near the customer

  18. SAIFI by Utility in 2010 • Com Ed 1.35 • AmerenCIPS 1.27 • AmerenIP 1.28 • AmerenCILCO 1.60

  19. CAIDI By Utility in 2010 • Com Ed 3.02 hours • AmerenCIPS 1.72 hours • AmerenIP 2.57 hours • AmerenCILCO 2.80 hours

  20. CAIFI by Utility in 2010 • Com Ed 1.73 • AmerenCIPS 2.01 • AmerenIP 2.05 • AmerenCILCO 2.38

  21. Generation Back Up • Some Utilities Charge $2 per kW Month • Added benefit for reliability and voltage support • Purchase fuel locally to help the economy

  22. Customize Rate Offering • City Council has flexibility as long as it is not arbitrary, capricious, unfair and is lawful. Must be open to others (similar) • Can define what “kW demand” is. • Can provide second feeds and line extensions. • Determine fees for line extensions

  23. Other Services Municipals Can Offer • Infra Red Scanner • Energy Audits • Underground Services • Well Service for Untreated Water • Hydrant Locations • Backup Fire Suppression from Ponds • Double Feeds, Multiple Feeds • Transformer On Site

  24. Customized Tree Trimming

  25. Questions?

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