Gardner made the right decision in 2008 when it opted not to sell its electric utility, Colin Hansen, executive director of Kansas Municipal Utilities, told city council members on April 15.
The meeting started a half hour late as work session participants awaited the arrival of council members Heath Freeman and Larry Fotovich. Steve Shute did not attend the meeting.
“That is one of the wisest decisions that’s been made in several decades,” Hansen said.
Hansen assisted Gardner’s governing body in exploring the sale of the electric utility in 2008. Instead, council created a separate board, the electric utility board (EUB), to oversee operations of Gardner Energy.
However, council members have since made changes to the EUB, stripping the board of some of its autonomy and making it more of an advisory board. Council members made the changes in order to comply with state statute, which requires the council — not an appointed board, set public utility rates.
Hansen was joined by officials from the city of McPherson, which has a board of public utilities oversee its electric and water utilities; and from Ottawa, which runs its utilities as departments, similar to how parks and recreation operates in Gardner.
The governing body approves operations of utilities in most municipalities in Kansas with fewer than 5,000 customers . As the utilities grow, more and more public utilities are run by some kind of oversight board. Forty percent of public utilities with between 5,000 and 20,000 customers are operated by a board; and 33 percent of public utilities with more than 20,000 customers operate under the oversight of a board.
Hansen said the switch to a board of public utilities is typically made to ensure greater stability.
“To run a really good public power system, you focus on stability and run it like a business,” Hansen said.
McPherson Mayor Tom Brown agreed that stability is one key to a successful electric utility.
“If you pick a plan, you work it. That becomes important,” Brown told council members. “You have to stay with it for 10, 20 years.”
Members of McPherson’s BPU are appointed by the mayor, and one member of McPherson’s three-person governing body serves as a non-voting member of the BPU. Brown said there has been little turnover on the BPU since its inception 55 years ago. There have been a total of about 10 members over the years, he said.
Ninety-nine percent of the time, the city commission agrees with the actions of the BPU, Brown said. The BPU and the city prepare their own budgets.
“They run their operation. We don’t tell them how to do it,” Brown said.
When the BPU has additional funds, the board members use it to secure future water rights or power generation. Extra funds are not turned over to the general fund, though the BPU does pay approximately $1.6 million in pay-in-lieu-of-taxes to the city each year.
“We don’t view any of these utilities as a cash cow,” Brown said.
Tim Maier, general manager of the McPherson BPU, said the utility’s rate are a lower than in neighboring communities. For example, McPherson’s rates for light industrial are 1 cent less per kilowatt hour than the industry average.
“It doesn’t sound like much, but multiply that by thousands of kilowatts,” Maier said. “It adds up.”
By owning its own utility, McPherson has been able to work with potential industrial developers to bring business to the community. However, Maier said McPherson, which boasts an oil refinery, has always had a large industrial load compared to other communities.
Maier said having an appointed board rather than an elected one has kept politics out of the BPU. Appointed board members receive $800 per month for their service.