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Slayton residents asked a lot of good questions regarding the City of Slayton’s municipal electric utility process at the third and final public meeting held on May 1 at the high school auditorium.
City staff and consultant Dave Berg, along with representatives from Nobles Cooperative Electric and Xcel Energy, were there to answer questions or provide clarifications as the special election looms near. Eligible voters will soon have their say as to whether or not the city proceeds with the effort as the special election is slated for 7 a.m. to 8 p.m. on Tuesday, May 14 at the Slayton Senior Center. “We’re hoping for a good turnout,” City Administrator Josh Malchow said. Absentee voting is also available at city hall or by contacting Malchow.
Berg addressed the ballot question that asks voters to authorize up to $7 million, acknowledging that the feasibility report’s estimate was only about $4.2 million ($1.7 million for the acquisition of Xcel assets, $500,000 to make system improvements and $2 million for startup costs). The difference is to allow for a higher amount if that’s what the Minnesota Public Utilities Commission (MPUC) deems the acquisition is worth. “They will ultimately make the decision on what the compensation is to be paid,” Berg said. “So we looked at a maximum feasible amount, that anything up to about $7 million, still is a reasonable feasible amount for the purposes of moving forward. So if the PUC awards anything between $4.2 and $7, the city can still move forward without having to come back and ask you all again.”
Berg added that the city can withdraw its petition at any time if the venture does not look feasible. “Voting ‘yes’ does not guarantee that a municipal utility will be formed,” he said. “What it does is allow the city to continue the process.”
Graphics show that the first-year rate of the municipal at the $4.2 million cost would be 12.11 cents per kilowatt hour, while Xcel’s current rate is just over 16 cents. Even if the acquisition cost is $7 million, the rate would be well under that, at 13.89, Berg said. If it was financed over 20 years instead of 30, the municipal rates would increase to 12.7 and 14.9.
When asked where they were taking their model from since they’d be the first municipal utility in Minnesota, Berg clarified that Slayton would be the first new one in a very long time. The rareness refers to when a city tries acquisition. “There are over 200 municipal utilities in Minnesota,” Berg said. “There just haven’t been any new ones formed in the process for a long time. In fact, Mn and Iowa are two of the hotbeds of municipal utilities in the entire country.”
Freeman Taylor thought Xcel was doing a great job and he expressed concern that wording in a recent letter made it seem as though the city was leaving the door open to raising property tax if necessary for this project. Malchow said it was the exact opposite. “The goal of the council from this inception of this idea has been to commit themselves to a financial plan and process, and if it’s not a self-sustaining, cash-flowing venture, then we’re not going to do it,” he said. “And that would be in the form of a revenue bond. The revenue from the electric utility would pay for the debt service, not a general obligation bond.” Malchow said. “If the PUC says, ‘Great argument, City of Slayton, but it’s going to be $12 million (for the acquisition)’ then we’re going to say, ‘No thank you,’ because we’d have to pursue other financial instruments there that would result in property tax increases or higher rates. And we do not want to sacrifice any other city projects by going out on this purchase.”
Berg said he’d been consulting for 40 years and had worked with more than 100 municipal utilities. In that time, he’s never seen general fund dollars moved from the city to support a utility. “The dollars usually flow the other way,” he said. “Generally, the municipals make a contribution to the general fund from the utility which helps keep the property taxes lower.”
Xcel’s John Marshall reminded residents that they had served the Slayton community for many decades and that they want to continue providing service as well. “We’re really proud of our service down here,” Marshall said. “I think we have impeccable reliability from an electric service standpoint. We’re making a lot of investments and have been for many years. We have plans to make more investments into the future to ensure you have top quality reliability and top service in your community.”
Mike LeTendre shared concerns about recently learning about Xcel’s proposed double rate charges from 3 p.m. to 8 p.m. Marshall said they were ordered by the PUC to study and propose a conceptual time of use rate. “It’s out there for discussion and consideration,” Marshall said. “In fact, there’s quite a bit of discussion about modifying that to become an opt-in program, so that it would not be obligatory for customers.”
LeTendre also expressed dissatisfaction with Xcel’s seemingly lack of commitment to put “boots on the ground” in the area as well as Xcel’s emergency response time, especially when it comes to getting power disconnected when there’s a fire.
LeTendre also stated he couldn’t afford to run a business at double the rates. He also questioned a resident who was happy with Xcel’s service, asking how he’d feel if, while waiting for Xcel Energy to arrive and disconnect the power, his wife succumbed in the fire. “I’ll guarantee you that Nobles Cooperative will be there because they have three guys on the fire department with us,” he said. “Those are the things we need to think about, not only the pennies coming and going, but the service we’re going to get.”
Amanda Leach talked about the times she lost power and asked what kind of response Nobles could offer. Nobles manager Adam Tromblay said the difference was that they are here. “We have five linemen in town, so the service is going to be very quick,” Tromblay said. “More of us live just outside of town, so we have resources that way. If it’s a large storm, we have cooperatives all around us We come together and we work together to get outages taken care of as soon as possible.”
When asked, Tromblay said they had enough current staff to handle a new service to Slayton if everything goes through. He said they not only have the ability to use their own staff but can also hire contractors if needed. Nobles does not have a profit motive either. “We do what’s right,” Tromblay said. “We don’t have an incentive to jack up your rate.”
Xcel reps shared that upwards of 200 structures would be replaced in Slayton, with about 50 already completed. It’s part of an ongoing effort to keep improving service, something they’re always looking to do.
City council member Kate Harmsen explained that a utility commission would be created if efforts move forward, so it wouldn’t just be the city administrator and city council making decisions. “It would be members of the community, if I understand correctly, that would be part of that utility commission, that would help digest these numbers and come up with suggestions and then potentially have community meetings to talk about rate increases,” Harmsen said.
When asked about the potential structure of the commission, Malchow said he envisions two city council members and potentially five additional members. They would review contracts with whoever is doing the maintenance, operation and billing. Berg said the vast majority of his clients who have commissions are autonomous and typically include one or two council members. “A municipal utility does not go to the PUC for rate approval,” he said.
Leach also asked city already had a financer and whether it was a fixed rate for sure. Malchow explained that it would be a bond, which was a fancy word for a loan, and that it would be at a fixed rate. As opposed to a bond in which people bid basically by interest rate, like the they’ll soon be doing with the Maple Avenue bond for $555,000, he said they’d be looking at more of a direct, negotiated sale and not an open one. “The reason is because we are blazing somewhat of a new trail,” Malchow said. “When you put a $555,000 general obligation bond on the market, people can feel very confident about, they have the full backing of the taxpayers, that they’re going to pay their principal and interest payment over the full amortization. With something like this, and it’s a revenue bond and it’s never been done before, it can be a little bit less appealing for people to bid on it.”
Regardless, Malchow said they are confident they have interested parties that will buy the bond issue. “We know that for certain,” he said. While they don’t know exactly who yet, when asked if they were looking at local institutions for the bond bill, Malchow confirmed they were.
Community solar subscriptions and how those factor into discounts versus the municipal utility rates were also addressed. Malchow said some folks in town, including the City of Slayton and school district, have had a third-party developer knock on the door, ask for information and have you sign a release for Xcel Energy, so they can get you signed up and save you money. Malchow said the city’s contract with Geronimo Energy (what it was called back in 2014-15) is 1 cent per kilowatt hour of saving. “Even if that goes away, we’re still predicting pretty heavily that the end-user retail rate for residential customers would be about 4-5 cents lower than what Xcel’s current rate is.”
