With decisions on some rate cuts and future power source in hand, Independence city officials continue to work on trimming Independence Power & Light expenses toward a moving target.
In May, the City Council approved a 4 percent across-the-board rate cut, to take effect Aug. 1. That comes on top of the 2 percent cut approved months earlier. At the same time, Burns & McDonnell consultants advised the council not to do anything more than a 2 percent cut, as that would be detrimental to IPL's reserves and potentially lead to a large rate increase in the near future, and they still have presented the final report of the rate study with recommendations.
Assistant City Manager Mark Randall, who is overseeing IPL operations following last month's unexpected departure by IPL General Manager Brenda Hampton, said that doesn't mean the council's decision in the wake of the preliminary report was poor.
For one, staff already had been working on $5.4 million in expense cuts to make the 4 percent cut work. Lowering rates in some way has long been a stated council goal.
“That was taking the status quo at the time,” Randall said. “Moving forward, we know we have to change the status quo.”
“It's still good info in that here's what it would look like if we didn't change the status quo.”
“That's always been the goal,” City Manager Zach Walker said of being able to lower rates. “The Burns and Mac report looked at it through the lens of if everything stayed the same.”
Randall noted that the city made $3 million in IPL cuts last year, plus the $5.4 million this year – from hiring freezes, operating and maintenance efficiencies and fewer capital improvements – and that's not yet taking into account projected savings from closing the Blue Valley plant next year.
At last report the plant had 39 employees, and Randall said about half that positions would be needed to keep the city's six combustion turbines in working order for peak power needs. The council approved a 10-year contract with Oneta Power in Oklahoma to replace the aging Blue Valley plant for necessary power capacity. That comes at an average annual cost of $1.525 million, and Randall said he estimates the Blue Valley closure will save about $3 million annually.
Randall said the recent cuts across the board were needed when comparing IPL to nearby utilities. Lowering and simplifying some industrial and commercial rates would go further toward attracting new business (and thus utility customers) and stabilizing rates, Randall said, and he and Walker anticipate the final rate study will propose a far simpler rate structure than what the city currently uses.
“We're more out of whack with industrial and commercial,” Randall said.
“There's no reason we can't (make it work),” he said of the rate cuts. “It's attainable.”
No matter what, Randall said, the city needs to avoid a rate increase not long after rate cuts.
“That's an unacceptable scenario,” he said.
One expense Walker doesn't plan to take off the books is replacing Hampton, who had been on the job less than six months after a national search. She replaced interim director Andy Boatright, who resigned in June 2018. Walker would not elaborate on the reasons and nature of Hampton's departure, which has not yet been finalized.
“We're going to want a longer-term solution there,” he said. “That's healthier for that department and for the organization as a whole to have someone fulfilling those responsibilities. It's such a complex area that commands a lot of (Randall's) attention.”
Walker said he's not immediately searching for a replacement, as he wants to get the rates issue resolved and also finalize the retiree health insurance question, which loomed over the end of the budget process the last two months.
“If we have too many tasks going, we run the risk of losing our focus,” Walker said.
The city manager acknowledged that what he believes the city needs in that position is not an easy balancing act.
“They need to understand the vision of the council and the community they represent, and effectively communicate that to staff, but also communicate back to the council and the people about what the needs are,” Walker said. “It's a weighty responsibility.”