The Gardner Electric Utility Board reviewed policies last week that would create a combined minimum $6.35 million in reserve funds for operating reserves and capital replacement costs.
The board discussed the reserve funds during a July 18 work session.
Bill Krawczyk, electric utility director, proposed maintaining an “adequate amount of operating reserves” to protect the utility and its customers from natural disasters, loss of major customers and periods of revenue uncertainties resulting from weather or economic factors.
“This particular fund is to prepare for any catastrophic events that might occur that might (require) large amounts of money,” Krawczyk told the board. “You have to budget for these kinds of things. If you didn’t have reserves in place, you’d have to borrow.”
Krawczyk proposed maintaining a minimum of $3.35 in operating reserves — about three months or 25 percent of the utilities’ annual operating expenditures – based on the recommendations of Sawvel and Associates, a consulting firm.
That money would cover about one month’s average fuel and purchased power ($694,000), six months other operating expenditures ($2 million) and two years of capital improvements ($660,000) in an emergency.
Krawczyk said he is also working on a $3 million capital replacement reserves policy.
That policy would set aside funds to cover replacement costs for the utilities most costly assets, including substation switch gear and breakers ($250,000), generator ($500,000), substation transformer ($1 million) and gas turbine ($3 million).
“(The policy is) designed to fund the most expensive piece of equipment on our system,” Krawczyk said.
Krawczyk said the policy would allow the board to reserve more money than the minimum reserve guidelines based on other issues, including financial risk facing the utility system, rate setting policies, variability in power costs, debt policies, future capital improvements and line extension policies.
The board will vote on the reserve fund policies on Aug. 4.
In other business, the utility board reviewed its line clearance policy.
In a memo to the board, Krawczyk said tree limbs that come in contact with power lines can cause service outages and damage to lines and electrical system equipment.
He said those problems could be mitigated by prohibiting the planting of tall-growing trees under power lines and by maintaining a regular schedule of trimming existing trees.
The proposed policy requires 10 feet of clearance between the tree limbs and power lines.
That amount of clearance would require the city to trim most trees about once every four years, Krawczyk said.
Tall-growing trees would be prohibited from being planted in utility easements. If trees are planted in the easement, the property owner would be asked to relocate the trees or have them removed by the city.
Tree trimming would follow standards endorsed by the International Society of Arborculture, the National Arbor Day Foundation, the National Arborist Foundation and the Tree Care Industry Association.
Electric utility board considers setting aside $6.35 million in reserve funds