Steelville City Comptroller Jennifer Basham provided an update on the city’s upcoming change in provider for electricity at the council meeting held on Monday, October 1. That update caused a number of questions for aldermen.
Basham noted that the city of Steelville is on the steering committee for the group of cities who have banded together in the attempt to obtain better electrical rates. She serves as secretary of that committee.
She reported that the city of St. Robert has been covering consulting, engineering and lawyer fees for the group, but it was time to pay their share. The group pays conglomerate fees on a scale, depending on size, and Steelville’s portion is four percent. In this case, the total bill was $1,372.95.
The committee had also talked about creating a reserve fund to use in case one of the cities in the group is late on making a payment towards the electricity purchased as a whole. The idea was to use this fund to cover the bill and prevent late charges to the other partner cities in the group. “We decided on $150,000 for the whole group,” Basham said. “If one city falters, the whole group gets a penalty.” The city of Steelville’s portion of the reserve fund would be approximately $6,000 for this year and Basham asked whether aldermen would prefer to pay that on an annual, quarterly or monthly basis (a decision that will be voted on by all cities involved and then determined for the whole group). She also noted that the group wanted the reserve funds collected by October 10.
Alderman Dave Hatcher questioned whether a city that didn’t pay their bill would do so at a later time, or if the group would be stuck with their portion of the payment. He agreed that a reserve fund was a good idea, but wondered whether a particular city, or cities, in the group could potentially be a problem for the whole.
“I didn’t realize this was all based on the whole,” he said. “I thought we’d be buying on our own, but we are in a group.”
“We are and we aren’t,” Basham replied. “We have a small group going out to buy the power for us. They are putting in contracts for us and we have to turn around and reimburse them. If one city falter, the bill is still due for the whole group.”
Alderman Mike Pounds added, “I have a question for you to ask: What if one city falters more than once?” He questioned whether that particular city would have their electricity cut off, or if the remaining cities in the group would have to cover their payment.
“We worry over here because we make decisions based on a limited amount of information and then we get into it and realize that it wasn’t what we thought,” Hatcher added. “It’s a big open question mark. But, you’re saying we have to move on this before the 10th.”
“So, what happens if a city defaults?” Alderman Charles Chipman asked again, for clarification.
“It sounds to me like the remaining cities will have to pay since we are under contract as a whole,” Hatcher replied.
“I can’t say that there wouldn’t be the same thing with another provider,” Basham noted.
Hatcher next questioned what penalties were involved if a payment was not made in a timely fashion, but Basham did not have that information.
“This is important,” Chipman said. Basham replied, “The important thing is to keep on track with our budget.”
“I’m not worried about us,” Hatcher said. “I’m worried about other cities who don’t (make their payments).”
Pounds agreed. “It sounds to me like it’ll cost us $6,000 every time (a payment is missed).”
Basham noted that the reserve fund was a proposal from the steering committee and that the idea could be voted down by the group of cities as a whole. “Some towns may not be able to pay even the small amount of the reserve fund,” she said. “But, I personally feel that $6,000 a year—we have that in our reserves, so it won’t hurt us.”
“I know we can pay it,” Hatcher said. “I’m not worried about that. You just said that’s set up so that if they fail, we pay. What do we pay?” Basham didn’t have that information.
“I don’t think we’re hoping any city will run into trouble,” she said. “But, we are trying to be cautious.”
“We’re part of it now,” Hatcher said. “If other cities are willing, we should pay our part—and hope and pray other cities don’t go bankrupt or don’t pay.”
“I hope they have an auto-pay option,” Basham noted. “That has been a nice thing that ShoMe Power has so we don’t have to worry about being late on it.”
Hatcher asked that Basham bring back any information possible from the steering committee meetings to help the council in its decisions for the city. “Just to have the information so we know what we’re really looking at,” he said.
He made a motion to approve the $6,000 payment in full for the reserve fund, but added a note to Basham to get information from her as the changeover progresses. “This is the first time this has come up since we’ve been involved,” he said. “I’m hoping these secret things don’t keep popping up all the way through this.”
Basham noted that the committee met in September for the first time since June and that it was the first time they’d discussed this matter.
The motion carried.