Former alderman Murray responds with answers about hydroelectric plant
Published 12:00 am Tuesday, November 21, 2000
VIDALIA, La. – At the Vidalia Board of Aldermen’s Nov. 14 meeting, residents filled the Town Hall meeting room to get answers regarding utility rate increases that were put into effect this month.
Some citizens in attendance said they were promised before the Murray Hydroelectric plant opened in 1990 that, with the royalties the town would receive from the plant’s power production, they might actually get a rebate this year.
But after two years of drought, the plant is currently producing very little power and, under its current contract, can delay paying royalties to the town until its production — and revenues — increase.
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Former alderman Bill Murray said that given such controversy, he wanted to answer some of the public’s questions regarding the plant — especially since his father, former mayor Sidney Murray Jr., helped establish it. He also shared his ideas about what should be done with &uot;Hydro&uot; revenues once they start flowing into town coffers again.
4Question: What was the purpose of building the Louisiana Hydroelectric plant?
4Answer: I&160;remember, probably better than most, the reasons that my father wanted to build a facility that would first stabilize the electric rates for Vidalians and, more importantly, insulate us from unexpected and uncontrollable cost increases. To date, the Hydro plant has done this.
I also vividly remember my father telling us his dream of Vidalians’ paying far less for electricity than anywhere else in the state. His concern for his friends and neighbors possessed him so that at home, he wished aloud, &uot;How wonderful it would be if the people of Vidalia had no electric bill at all.&uot;
He, and we, knew that this was not probable, but it kept the dream alive through the most difficult of times for him and all of those involved in a project besieged by constant obstacles.
4Q: How is the reserve fund of Hydro plant revenues set up?
4A: The City of Vidalia is a partner in the Hydro plant and is paid a periodic royalty based on standard economic practice procedures applied in contract form. As with all developments, the debt must be paid down before profit is realized.
During this period of continuing forward, Vidalia must pay for our cost of power. The city receives a periodic Hydro royalty payment and shortly following must send payment for the cost of power consumed.
The first priority for the city was to set aside a portion of the revenues received in a reserve fund held for the express purpose of paying for the city’s purchase of power in the event that the cost of power consumed exceeded the revenues received.
During the early years (the plant was built in 1990) and up to the middle of 1998 the revenues the city received were enough to pay for our cost of power and keep our rates constant. This is the period I spoke of earlier, the period during which the debt must be paid down before the profit is realized.
In the middle of 1998, the revenues began exceeding the city’s cost of power obligations. A fund was established and the profits began to accumulate. These monies are strictly governed by Vidalia city ordinance [see box].
Q: So what has happened to those revenues to the town in recent months?
A: As you know, the low river level over the past two years reduced the output of the Hydro plant, therefore reducing profits. Remember, the city had accumulated some profit above the reserve fund and used these monies to keep our power cost at 38 mills per kilowatt hour for some time even though the revenues were being withheld.
As a provision of the city’s contract, and rightfully so, the Hydro royalties can be withheld during low production periods. [About $1.7 million in] royalties are due and payable with interest and will be paid sooner rather than later.
Q: So what do you believe should happen to electric rates once those royalties are paid?
A: It is my opinion that the mayor and (Board of Aldermen) should discuss now the possibility of returning the electric rates to what they were prior to the increase when all withheld revenues are received and the city has received the first current royalty payment.
Possibly, the electric rate should be readjusted from the date increased since the revenues owed to the city are accumulating from prior to that date and are due with interest. We must remember that even though they are being withheld, the current royalties should reflect a profit to Vidalia, and the city ordinance governing these funds will be applied.
Q: In your opinion, what else should town officials do in the future with Hydro revenues left over after the town pays for the costs of being a Hydro plant partner, pays any debt requirements, pays into its revenue fund and makes transfers its the town’s utility fund?
A: (I propose the) establishment of a &uot;security fund&uot; equal to the highest or most current year rebate amount. This would simply mean that if the first year the mayor and (aldermen) decided to rebate the allowable 50 percent of revenue available, the remaining 50 percent would comprise the security fund.
Each subsequent year, the fund would be adjusted by the necessary amount to equal the highest rebated amount. All interest earned by the security fund should remain in the fund and not be considered in calculating the fund’s yearly balance.
This would insure that some funds would be available to protect us for a short while if revenues are withheld or some unforeseen event eliminates revenues altogether. We would not suffer an immediate, full force increase in electric rates or suffer an immediate loss of a rebate that we will become accustomed to.
I&160;propose that any cost of administering the security fund be determined yearly and paid out of the current year’s Hydro revenues remaining after the rebate has been established. Establishing this fund would mean that rebates will be delayed by one more year, but I sincerely believe something of the sort is necessary.