The LaFollette Utility Board met last Thursday night to discuss its 2009-10 electric and water budget.
This fiscal year’s projected budget is based largely on spending and revenue trends from last year, with some exceptions.
LUB General Manager Kenny Baird said he forecasts a conservative $650,000 net income for next year.
“I’ve probably projected revenues at less and expenses at higher,” said Baird of his projection.
Baird said it was difficult to forecast the electrical costs because of the Tennessee Valley Authorities varying fuel cost adjustments and changing rate structure. TVA is going to a monthly fuel adjustment rate, where before it was every three months. The nation’s largest power producer is also changing its wholesale rate structure in April and has not yet informed utility boards of the expected change.
“Energy costs may eventually be based on the time of day and the amount of demand; they are moving towards a more intelligent environment,” said Baird.
“We’re looking at cutting costs any way that we can,” said Baird. One large cut is being made in the form of health insurance. LUB has been with Blue Cross/Blue Shield for nearly 10 years, but is planning to switch to a more cost efficient company, as a result of insurance cost increase. In order for the utilities to keep the same plan that it has now, it was going to cost around 17-percent more per year.
After shopping around, LUB found a company that would work with it on keeping nearly the same, but with lower costs. The switch will ultimately save LUB around $40,000 for the year.
“United Health Care really wanted out business,” said Marlene Broadway of LUB.
By going with United Health Care, LUB’s insurance premiums will actually go down 3.3-percent for basically the same plan and coverage.
LUB has several projects on this year’s agenda.
“It’s not etched in stone, but we’re projecting $4.8 million for projects this year, which is quite a bit less from last year,” said Baird. The reason for fewer projects this fiscal year is many past projects are in the final stages of being completed.
The Speedwell to Red Hill line extension should be completed by late summer and the Doaks Creek substation is expected to be operational before fall.
The $4.8 million will be spent on future projects such as running line upgrades from Alder Springs to the Penninsula, as well as Demory, Norris Point and other outlying areas that prove problematic due to the power lines being too small to handle the electrical load. Three hundred thousand dollars will go for purchasing transformers and voltage regulators. Six hundred thousand dollars will purchase around 4,000 more digital meters as the utilities continue towards an overall digital upgrade.
Baird said he expects more tree trimming will be needed this fiscal year, so he added $30,000 more into the budget.
There are no employee raises scheduled for this year and no funding was added to the budget for trucks and equipment, as new vehicles were purchased last year.
Baird said he projects to end the fiscal year with around $1.5 in the electrical budget.
The water and sewage budget is not in the shape that the electrical system is. While it also follows similar spending and revenue trends, that is not necessarily a good thing, as the water and sewer usually ends each year with a deficit. This fiscal year is no different, with Baird projecting a bottom line loss of around $93,000 in the water department and $819,000 in the wastewater department, which includes depreciations.
“Now is the time that we must do something about the water and wastewater rates,” said Baird.
Currently, LaFollette Utilities has some of the lowest water and sewage rates in the area, with water costing only .7 cents per gallon. This equals out $22.45 per 5,000 gallons of water. This cost is between $4 and $6 lower than surrounding utilities.
“I know it’s something no one wants to talk about; everyone takes water for granted, but running these systems are expensive,” said Baird. He pointed out that electric rates have gone down for three consecutive terms and that the water rate had not been raised for quite some time.
“We’re about two years overdue on this; we have to get some funds so we can operate our water system,” Baird said.
He recommended to the board they approve the electrical budget, but defer on the water and wastewater budget until a meeting could be held with the LaFollette City Council to discuss the water rates. The board unanimously agreed and approved the electric’s budget only, while deferring on the water.
LUB member Sue Troutman’s term is up and she will be sworn in for her next term on July 2 at 11 a.m. LUB will also elect officers at that time as well.