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We hope Lodi shows faith in electrical utility


Saturday, June 14, 2008 6:23 AM PDT

Comments (29 comment(s))

John Johnson has asked whether the citizens of Lodi should sell the electrical utility.

It's a question that has been raised before and probably will be again. But we wonder: Is it the right question right now?

Johnson is a local business appraiser and political activist. He has pushed a tax increase campaign for recreation and public safety, and he serves on the city's Budget and Finance Committee. He surely sees the benefit of an immediate cash infusion into the city budget. In a recent column, he expressed dismay that Lodi's residential electric rate is the highest he could find, higher than the Pacific Gas and Electric rate in Stockton.

This week, Councilman Larry Hansen responded by pointing out the long-term benefits Lodians get from owning the electric utility and showing that rates are hard to compare.

Perhaps so, but we wouldn't quibble with the idea that residential rates in Lodi are high right now.

Years ago, former electrical utility director Dave Curry uttered a simple idea that we believe in still: A municipal utility ought to do two things, Curry said: give citizens a lower rate and give them a few extra municipal services.

For most of the 98 years they've owned the electrical utility, Lodians have received their money's worth — a low electric rate and a transfer of many millions from the electric utility fund to the General Fund so we could spend more money than other cities our size on police and fire protection, and parks and recreation programs.

Hansen was right to point out that our benefits would be due the PG&E stockholders if that company delivered our power.

But our rates are not low right now, and the transfer from the General Fund has been reduced, leaving the chiefs and department heads having to scramble to make budget.

It's as if our dividend has been cut.

Should we pause now to take a hard look at our asset and the value of selling it? Wall Street investors do this all the time, don't they?

Well, yes. But it's tricky stuff.

Any savvy stock market investor will warn against making short-sighted, emotional decisions. Sometimes a stock is a dog and you dump it. Sometimes a change of management can turn things around.

We think the latter describes the situation we're in right now, and the current management is achieving encouraging results.

News this past week that the utility's bond rating has increased is one piece of good news that shows current management is performing well. The chart accompanying this article is another. Thanks in no small part to hefty residential rate increases and lower transfers to the General Fund, the electrical fund reserve is heading in the right direction.

In a few more years, Hansen said, we will pay off some of the mountain of debt the city took on after California deregulated the electrical power market. That will reduce operating costs and give the city a shot at reducing the residential electrical rate. Lowered debt will give us the opportunity to invest in low-cost power if a deal comes along.

We think Hansen has the better case in this debate. We would add these observations to bolster his take on things:

PG&E's bankruptcy is testimony to how difficult the times were that we've just gone through. As bad as things got, Lodi never resorted to bankruptcy.

Our fellow citizens in Stockton are looking to buy their power distribution franchise from PG&E. PG&E is fighting to hang onto the franchise. What some here are calling a bad deal is being called a good deal by others. That's what makes a stock market.

It's always right to look hard at a stock when it takes a nose dive. Hanging on to it through a temporary bad patch takes grit.

We hope Lodians will show grit and faith. We see higher dividends ahead if we do.

— Lodi News-Sentinel

Reader Feedback

OTH wrote on Jun 19, 2008 3:05 PM:

" These guys just think of the money from redevelopment They are not going to be paying the debt. It's your kids and their kids. It's grandma and grandpa who are having a hard enough time making it now.

No you keep your shell game, play it somewhere else. "

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classof72 wrote on Jun 19, 2008 1:56 PM:

" Electric rates subsidizing general government services, and redevelopment to further subsidize general government obligations; I guess we will just have to acquiese to the City's intent to become a welfare recipient... "

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ZZ wrote on Jun 19, 2008 10:42 AM:

" Last night at the City Council meeting Mr. Hansen voted to put Lodi deeper in debt to the tune of over, $500 million by voting for Redevelopment. "It's right for Lodi" was his comment. He should be voted out. "

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OTH wrote on Jun 18, 2008 7:18 PM:

" papercut the man doesn't have a set big enough to apologize. "

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papercut wrote on Jun 18, 2008 4:16 PM:

" Mr Hansen owes us a very big explanation and apology. "

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OTH wrote on Jun 18, 2008 11:39 AM:

" Classof72 you are wise for your years. If Lodi keeps on(and this will bring out the vultures) we can kiss this city goodbye.

Rates are through the roof and all we have is the person's word who is partially responsible for getting us into this mess that they will come down.

If I go to the grocery store are they going to take my faith for payment?. Better yet let me pay my city bill with their faith. After all what's fair is fair. I'm supposed to have faith why can't they. I'll pay eventually "

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classof72 wrote on Jun 18, 2008 6:43 AM:

" Whether or not Lodi should sell its electrical utility to PG&E is not the issue, but rather, should Lodi's residents and businesses pay a higher rate for electricity to subsidize other public services. As a 30+ year resident of Lodi, I have seen our police and fire departments become quite creative in their budgeting process, realizing that they will receive electrical utility dollars to support their cause. To propose cuts to the police and fire departments to reduce electrical rates would be certain death for the council, as the unions have our council on a leash now. "

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Cogito wrote on Jun 17, 2008 3:16 PM:

" Can could you imagine how inexpensive PG&E could be if they we're tax exempt? "

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Cogito wrote on Jun 17, 2008 3:13 PM:

" Thanks for the info Reality. "

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papercut wrote on Jun 17, 2008 2:09 PM:

" realty, the utility doesn't "pay". The city "takes" over 3 million a month to pay bills and another 3 million a month to line their cash surplus with so they wont drop back to their BBB- rating they had from Fitch. They switched to S&P and cost us over 9 million dollars to get that rating boosted to next to worse, instead of worse. Fitch wouldn't graduate them so they cut a deal with S&P that put LEUD about 100 million in debt. It's called cooking the books to line their own profits. Why doesn't Lodi have an accountant insteadofjustalineofbigspendersandamanagerthatsignsanythingputbeforehim? "

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WY wrote on Jun 17, 2008 11:51 AM:

" Oups... I was a bit ticked writing that, you all get my idea ... right? Grand Californian and what not. "

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WY wrote on Jun 17, 2008 11:49 AM:

" Doing business at Disneyland. OUr seven day trip to Disney's gran Clifornian took years to save for and cost close to four grand with expences. That was for four people. That is a crime if they go there to talk out what should be done here on pine street. :( "

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reality wrote on Jun 17, 2008 11:04 AM:

" cogito - no the eud doesnt pay any tax. no municipal entity pays a tax. SJ county pays no tax on the county hospital as an example. what Lodi Elcetric does is "pay" a portion of theri revenue to the general fund to hepl pay for parks, police, fire, streets etc. "

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papercut wrote on Jun 17, 2008 8:30 AM:

" They pay for Hansen's trips every couple of weeks, whether it's NCPA related or not. Even their meetings at Disneyland, Reno and Las Vegas. "

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Cogito wrote on Jun 16, 2008 4:12 PM:

" As far as a "few extra municipal services" paid for out of the electricity dollars, does the LEUD pay any corporate income taxes? Do they pay any property taxes for everywhere they have a line underground? I really don't know, I'm just asking. Because PG&E does. One of the reasons Yolo Co. turned down SMUD to stay with PG&E was that they would have given up the millions of dollars annually that PG&E pays in local taxes. I'm sure some of that money would find it's way back to the city. "

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papercut wrote on Jun 14, 2008 10:08 PM:

" nellie, they didn't axe Flynn because he knew too much. If they would've tried to smear him, they all would've gone to jail when he snitched. As it is they all got away scott free, as usual. The real and complete story was never told and never was an audit done of the cooked books by this whole bunch. Most everyone in Lodi knows of Mr. Hansen's big bang in 2005 and yet he keeps trying to hide the fact that he was the one responsible for brokering the power deal that broke LEUD's back. Why is he in such denial? "

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Whoa Nellie! wrote on Jun 14, 2008 7:08 PM:

" acquaintances... oops! "

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Whoa Nellie! wrote on Jun 14, 2008 7:07 PM:

" PCut- if you will remember, it was Hansen and Beckman who finally joined Susan to fire Donovan and Hays due to public outrage (why they didnt axe Flynn is good question- it was all done on his watch).

Sorry, I don't belong to WGCC. Too snobby for my tastes. I'm not interested in that group, and very few of my friends are members. More like friends/acquintances.

You sure seem to know alot about what is being said out in the clubhouse. Do you have the place bugged? "

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OTH wrote on Jun 14, 2008 6:03 PM:

" That las post was not ready for posting! "

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OTH wrote on Jun 14, 2008 6:02 PM:

" I have in thr electrical utility. Faith that the rates will continue to rise. How times does something op that it comes back down?
The silly council willfind an urgent matter that requiresssion of city funds. "

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Whoa Nellie! wrote on Jun 14, 2008 4:50 PM:

" As for the EDITORIAL, I agree 110%.

One of the best from the LNS in a while. "

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papercut wrote on Jun 14, 2008 4:50 PM:

" Nellie, although my glass is only one third full, it's water, while yours contains those double shots of jack daniels with that bud light backer, the drink of choice for the loose tongues braggarts at the country club. "

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papercut wrote on Jun 14, 2008 4:47 PM:

" If Hansen and his buddies wouldn't have let Hayes and Donovan, with the help of Dixon Flynn fleece them, Lodi would still be solvent. Our electric rates are high only because those rates include other fees that have nothing to do with LEUD, except for that power that Hansen and the NCPA brokered that caused a 17% raise. Our electric rates go up because the city council knows that's their last avenue to pay for their mistakes. Those high rates are paying for underground pollution cleanup, and the fleecing of Lodi's leaders on that same issue. Those so called electric funds captured from the residential ratepayers pay for many other things, including millions to the general fund every month to pay the city's other bills, the hundred thousand or so that Hutchins loses every month and there are three more rate raises scheduled within the next three years, some of which will pay for ........WATER METERS. Huh? "

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Whoa Nellie! wrote on Jun 14, 2008 4:47 PM:

" Observer- the reason Paper Citizen wants to know if you know Hanson and the CC is to see if you are a GOB. Of course you are, you owned a business in town (insert sarcasm).

In his mind just because you and I know past & present CC members, and agree with them on most issues, we must be "yokels" who have cocktails and dinner with them (which I have NEVER done, btw).

Papercut Taxpayer needs to calm down, look at the long term, and stop being flying off the handle. Can you imagine his blood pressure?

With him, nothing is ever right.
It's all a giant CC-Developer-GOB conspiracy. His glass is always only one-third full while yours and mine is at least half full. "

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Observer wrote on Jun 14, 2008 10:35 AM:

" And yes, I know Hansen and all of the Council members. I don't know the current utility director. Why that's important to you, I don't know? "

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Observer wrote on Jun 14, 2008 10:34 AM:

" Papercutting Taxpayer....I'll admit that I don't have the electrical engineering degree that you must have to make intellectual comments on this subject. I only know what I've paid out of my pocketbook for the past 40 years. To me that's real! I know that over those 40 years that 37 of them I paid some of the lowest rates in the State. I don't follow it like I did when I was still in business but I think I've got a pretty good handle on it. "

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papercut wrote on Jun 14, 2008 8:24 AM:

" Observer, you must be a friend of CC Hansen, the real LEUD manager who's been making these decisions along with the big boys from NCPA, that charge you big bucks for your membership. Who's going to pay for that new power plant and the 30 million or so, the new transmission lines from the east at another 30 million or so, and the newly transacted bond loan at another nearly 50 million total? RESIDENTIAL customers will pick up the tab while the corporations and big boys will skate by again. "

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papercut wrote on Jun 14, 2008 8:19 AM:

" Please tell me who's going to buy a utility like LEUD that's nearly 100 million dollars in debt? LEUD depends on PG&E for their electric supply through their lines coming from the west and if ever PG&E has a major power failure LEUD would be the last to have power restored. Lodi can't afford to sell the utility, otherwise where would they get those funds that're taken from it each and every month? Where would the Lodi leaders get their play money from without transfers from LEUD. The transmission system is old and decrepit and you'll find no takers for a utility with an A- rating. It's costing us ratepayers 9 million+ dollars to get that next to bottom upgrade. And besides, News-Sentinel, aren't you one of the city favorites that get your electricity for next to nothing, while PG&E wouldn't give you any break? That'd be your reasoning for wanting to keep it. "

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Observer wrote on Jun 14, 2008 8:11 AM:

" Thank you LNS for the article. This is something I have been trying to say for the past year. You have to look at the whole picture when making a long term decision. I had a business here in town for enough years to remember the days the PGE electrical rates were more than 20% higher than City of Lodi. It's only been the past three to four years the roles have been reversed. I too believe the utility department is back on track. If we're faced with the same scenario five years from now I may be ready to look at other options, but to make a rash decision based on a snapshot would be foolish. "

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