City Water, Light and Power is requesting a base rate increase and a new tax and blaming it on the cold summer.
Customers of CWLP have seen rate increases when they use more power, and now they are being asked for an increase because they use less power.
I requested information from CWLP under the Freedom of Information Act, and I believe it shows the rate increases the past several years can be attributed to the wind-power contract that was coerced by the Sierra Club.
This contract is a 10-year contract with NextEnergy Resources (formerly FPL Energy).
CWLP is purchasing energy from two wind farms in northern Iowa – Hancock Farms and Crystal Farms Wind Farms. The purchases began in November 2008, so the contract should end in October 2018.
CWLP does not need this power, as it already has excess generating capacity to sell power on the open market.
Reviewing internal financial statements from November 2008 through July 2014 reveals losses of over $70 million related to this contract, and the losses are escalating.
For fiscal year 2013, the loss was over $16 million, and for fiscal year 2014 it was $15.9 million. For the first four months of fiscal year 2015, the loss is $7 million – so on pace for $21 million.
Meanwhile, public records show NextEnergy earned $229 million in the second quarter of 2014. Why are we subsidizing them?
It is fundamentally dishonest to blame the current financial situation at CWLP on cold weather when it loses so much on this disastrous contract. It would harm the poor, middle class and businesses to permanently raise rates when the losses will disappear.
It also has greatly harmed the employees of CWLP and all city employees by diverting funds that could be used for pension payments, raises, plant upgrades and infrastructure. CWLP employees have been blamed for inefficiencies when the losses clearly are not their fault, but the fault of previous management and the contract itself.
Individuals and businesses continually have been hit up for more money when the contract in question was not for their benefit. They could have used the money to stimulate Springfield’s economy instead of pouring it down the drain.
Essentially, all the consumers at CWLP and the city have given over $70 million, and potentially around $100 million, in corporate welfare to a few corporate entities and have received no benefit in return.
The contract itself, I believe, was done in an unscrupulous manner. From what I understand, the Sierra Club threatened CWLP that it would block the permits to build the new Dallman 4 plant if it didn’t cave in to its request to purchase wind power.
This threat occurred even though CWLP had met all environmental regulations. Who would guarantee a purchase price for something they didn’t need when the future market price was unknown?
A contract done under duress or coercion can be determined to be invalid. Threatening to block the operation of a power plant with a lawsuit can certainly be considered coercion.
CWLP also says it needs this increase so it doesn’t violate its loan covenants. CWLP should renegotiate the loan covenants until the end of the wind contract. Private-sector companies have to renegotiate loan covenants all the time, as they cannot just raise prices to satisfy the lender.
I certainly do not believe the CWLP consumers should be hit with continuous permanent rate increases when the contract will end and hopefully another similar contract will not be signed.
Jack Hellner lives in Springfield.
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