From the Mayor’s office

Mayor Fights to Protect Citizens’ Rights, Stop Loss of Valuable Community Asset

City’s release is in blue, I&M counter points are in black.

Fort Wayne, Ind. – Joining forces with State Representative Win Moses (D–Fort Wayne), Mayor Tom Henry today held Indiana Michigan Power (I&M) accountable for failing to meet the terms of its lease with the City of Fort Wayne as the current provider of electricity to portions of the central city. In response to its deficiencies, the City has issued a letter of default to I&M.

Both leaders also reaffirmed their determination to fight for the rights of Fort Wayne ratepayers and taxpayers, and to defend the community’s ownership of its electric utility and the opportunity it represents to serve its customers.

“Fort Wayne’s electric utility is a potential $100 million community asset,” stated Mayor Henry. “Our utility was leased, but never sold, to I&M. For 35 years, I&M has had access to that asset and enjoyed the privilege of serving our customers. After such a long time, I decided it made good business sense to revisit the deal and ensure that our citizens receive fair value moving forward. I believe a little competition is good. What is important to note is that when the lease ends, I&M must return a viable electric utility system to the City. What troubles me is that I&M is not ready to do that, and the clock is ticking.”

Ahem.. From I&M

I&M has been providing low-cost electricity for the life of the 35-year lease, and even now I&M is among the lowest-cost electricity providers in Indiana. Customer satisfaction with I&M is at an all-time high, driven in part by improved service reliability. This became especially apparent during the December ice storm when I&M was able to amass more than 1,500 utility workers from around the region to restore power during one of the worst winter storms in more than 20 years.

“I&M wants you to believe the Fort Wayne electric utility belongs to them, but the lease is clear,” noted State Rep. Moses. “It belongs to the people. When they talk about rates skyrocketing and poor service with a new operator, they’re using scare tactics to cover the fact they’re trying to steal our system. I&M has never paid one penny for the right to serve our customers. Their behavior is unfair. It’s also something unheard of in the industry.”

Our system? Not so fast. There’s nothing really left to steal boys.

In 1974 when the city of Fort Wayne and I&M entered into a lease agreement for the city’s electric generating and distribution facilities, both utilities served Fort Wayne customers. Duplicate distribution systems were intertwined throughout the city, and customers next to one another received service from different utilities.

But the city’s system was in trouble. Costs were escalating. The generating plants and infrastructure were aging and unreliable. The city purchased 85 percent of its power from I&M. According to then-Mayor Ivan Lebamoff, the money necessary to bring the municipal utility up to par would have resulted in a rate increase so large that the city would lose its remaining customers to I&M.

Over the course of the lease, I&M has invested $86 million to create a modern, integrated electric system that serves Fort Wayne today and, in the course of doing so, retired 51 of the city’s 53 circuits.

With this legal notice, the City is taking action to protect its electric utility system, its rights under the existing lease, and of greater importance, its customers and citizen-owners. The letter was sent on August 20, 2009. It describes areas in which I&M has not met its basic obligations to the people of Fort Wayne.

The City’s letter to I&M outlines the following defaults under the lease:
· Failure to provide emergency services. I&M failed to provide emergency backup electric service to the City’s Three Rivers Filtration Plant and to the St. Joe Dam and Pumping Station. The City spent nearly $8 million to address and mitigate those failures. I&M’s recklessness left some of this community’s life-sustaining services vulnerable.

· Refusal to coordinate with the City concerning use and waste of leased property. Rather than coordinating with the City as required, I&M unilaterally replaced or retired facilities and equipment undermining the ability to guarantee the delivery of a viable, independent electric utility system to the City upon conclusion of the lease. Additionally, the company continues to modify the system at an increasingly aggressive rate in an attempt to obliterate it, despite the City’s election to take it back.

Is that right?

During the past four years, I&M negotiated with city officials to end the lease by paying the city for its few remaining assets. But rather than respond to our offers, the city broke off negotiations and publicly announced its intentions to replace I&M as the provider of electric service to customers in the central core of Fort Wayne.

The most important issue facing both parties is the right to serve the customers. While the city will receive what remains of its original assets when the lease ends and has the option to purchase certain improvements made by I&M, this does not give the city the right to “replace” I&M or serve customers in our service territory.

A 1980 state law, sometimes called the “territorial act,” created exclusive service territories for utilities to avoid the wasteful and costly duplication of electric facilities. I&M was assigned exclusive rights to serve Fort Wayne under this law. The city recently hired lobbyists to attempt to change that law and to force I&M customers to become customers of the city. Fortunately, those efforts were not successful, and the law remains in place.

Which is exactly why the city cannot serve several additions in Aboite Township with water and sewer. The territorial rights belong to Aqua Indiana.

· Refusal to provide essential information and data to the City. To plan for and manage the transition from I&M to the City, the City created a working group. On numerous occasions, the group asked for data and information from the company to make those preparations. Each of the City’s requests was rebuffed. Simultaneously, I&M criticized the City in public for not presenting a detailed transition and operational plan, something that could only be developed with the information that I&M was, and is, holding hostage.

“In spite of an extensive public relations campaign to enhance its image, expanded corporate generosity to buy goodwill and protests to the contrary, I&M has not met the terms of its lease with the City, been honest with the people of Fort Wayne or negotiated in good faith,” added Henry. “The company has refused to provide information necessary to prepare for an orderly transition. It has not coordinated on the use of leased property. And of greater concern, I&M has not installed the facilities necessary to provide emergency electric service to the City’s water filtration and sewage treatment plants, putting those fundamental services, and our public health and safety, at risk. Safeguarding our community is my highest priority. These are failures I cannot allow to go unchallenged.”

Someone’s a liar.

[...]

The City’s current lease with I&M was signed on September 13, 1974. It will end on March 1, 2010. At the beginning of June, Mayor Henry announced that the City had elected to exercise its option to take its municipal electric utility to the market through a competitive bidding process that would allow for the selection of a new operator.

City officials have declined to share the conclusions of a second study completed last year and have now hired another consultant to conduct a third study.

Gee, more consultants.

IMHO, we don’t need no new stinking operator.

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This entry was posted on Wednesday, August 26th, 2009 at 3:44 pm and is filed under City & County Government. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.