The talk of the town Pt. 1

This letter to the editor appeared in the Pierre Daily Capitol Journal last night, and I was also provided a copy by the authors. It's regarding the Oahe Electrical Coop's attempted purchase of the City's electrical utility, and it's certainly going to generate some debate.




Dear Editor:

This letter is in response to the many statements put forth by various officials regarding the proposed consolidation of electric systems between Oahe Electric and the city of Pierre. This will be among the first of informative pieces put forth to give the residents enough information to make their own decision regarding this issue.

The proposed consolidation would be required to go to a vote of the residents of Pierre and would require a 60% vote in favor or the concept would fail. During the education process there will be several points at which the residents or Oahe Electric can back away from the process and not proceed. This is not a “hostile takeover”, rather an example of democracy at work when the majority of people decide an issue.


Why is Oahe Electric interested in consolidating electrical systems?

Pierre’s debt and liabilities currently stands at approximately $22 million. The residents of Pierre have been hit with over 15% in electrical rate increases over the last four years and the current commission promises continual annual rate increases. Sewer, water, and garbage rates have all skyrocketed as well. The sales tax was recently raised to the maximum allowed by law.

It hardly needs to be said that these are challenging times.

Oahe Electric has not had a rate increase since 2000. During that time we have paid $2 million in margins back to our member/owners. We also have paid gross receipts tax and property tax amounting to $650,000. It is important to remember that our motive is nonprofit.

Our board has looked ahead and seen challenging times as well. This is a community challenge, not simply an Oahe Electric or Pierre issue. We have the opportunity to strengthen both entities and our community as well with this consolidation. We should not fail to explore this fully simply out of fear.

The residents of Pierre would not lose control of their utility.

The proposal allows for every resident and utility user to become a member/owner of the cooperative. The ownership would not change; the letterhead on your monthly bill would change to Oahe Electric. Every member would have an opportunity to attend the annual meeting and participate in the election of directors and the development of bylaws governing the operation of their utility.

We do one thing very well: sell electricity. We don’t use our electrical revenues to offset losses in other areas. Our budget is fairly simple to review and is provided to the owners at the meeting. When we have a profit, we give it back to the owners.

What is the City of Pierre’s utility worth?

Based on a detailed analysis and work with investment bankers from across the country, the estimated value is somewhere between $15 and $22 million. If the consolidation occurred the city could eliminate the $3 million annually it is currently spending on debt service.

A more detailed valuation by an independent firm could be contracted at some point in the future and would be made public. Ultimately, the proposal would be in a bid form and would go to the highest bidder.

What will my electrical costs be?

The proposal has always allowed for a special rate class for city residents. Pierre residents would enjoy a permanent distinct class difference from our rural member/owners. It costs less to serve high density areas with more members per mile of line. Secondly, it would ensure that Pierre residents would continue to receive and benefit from their undiluted low-cost WAPA hydroelectric power allocation. The proposal allows for an immediate rate reduction for Pierre residents from 5%-15% depending upon the purchase price.

How else would this change impact our community?

The proposal includes hiring all of the electric department employees as well as buying all of the equipment. The school district would enjoy a windfall as well with almost $300,000 in new tax money flowing into their budget.

This is not a new concept.

Utilities across the country have merged time and again. The same is true with school districts, farms and in business. Simply put: it costs less per customer to run a larger entity than a smaller one.
Our motive is nonprofit and our goals are not hostile. We are looking at new options in challenging times. If the consolidation were successful, every resident of Pierre would be an equal member/owner with our current member/owners in Hughes and Sully counties. We would welcome you into the cooperative family.

Who would pay for the street lighting and traffic signals?

With an estimated $1 million in annual savings to the city of Pierre by the elimination of debt, this stated $27,000 annual cost could be considered insignificant. The city would continue to pay this cost from the general funds as they currently do, or Oahe Electric could absorb the cost of the street lighting. Regardless of who pays the bill, the cost would be a pass-through directly to the residents.

Soon we will be holding informational sessions in Pierre as well as coming out with various other media pieces. If you or your group is interested, please don’t hesitate to call. At this point, both the residents of Pierre as well as Oahe Electric are doing their homework to see if this concept is a fit.

If you would like more information, questions answered, or would like to help please don’t hesitate to call us. Additional information on Oahe Electric can be found at www.oahelectric.com.
Sincerely,

Oahe Electric Board of Directors
Chris Hipple
Robert Sargent
Jake Weischedel
Jim Feller
Ken Gillespie


And the gauntlet is thrown down!

Comments

Anonymous said…
I've been told the WAPA continued allocation is not a sure thing. Chris Hipple says not true?
PP said…
They say not true. (It's in the letter)

Apparently because Oahe Electric is non-profit, it's ok.

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