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Energy market could put squeeze on Lodi utility

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Posted: Tuesday, September 27, 2005 10:00 pm

Hurricanes Katrina and Rita may affect local residents afterall through higher costs to the Lodi Electric Utility which could ultimately be passed on to customers.

Gasoline prices skyrockted right after Hurricane Katrina struck, and many experts predict prices could rise higher in the wake of Rita. Natural gas prices already were on the rise prior to the storms and should go even higher now, experts say.

More than one quarter of Lodi's energy comes from natural gas powered turbines, and if prices rise considerably it could mean Lodi could find itself even further behind when it comes to buying power.

While Lodi Finance Director Jim Krueger said the $40 million the city budgeted for its bulk power needs may not be enough, the interim utility director appears more optimistic.

Krueger said it appears the price of power has begun to escalate again, and how that may shake out for the city is unclear.

"We don't know what the effect of that may be, but it's no mystery that when the cost of gasoline goes up the cost of energy goes up," he said.

The city did experience a higher level of demand for power during this summer, but that high demand also brought a higher cost of delivering the power.

Lodi had to budget $8 million more than it had planned to spend on power this year, and that has created an expected deficit of more than $2 million because the utility's reserves have been greatly diminished.

Krueger said the city is still considering its options on how to either raise revenues or cut costs. He added that city staff is developing options and should be providing more information in the next few weeks.

Interim Utility Director David Dockham, the former Roseville Electric assistant utility director hired by Lodi after firing Alan Vallow, has said his first priority since joining the city at the start of the month has been securing the city's power supplies.

On Tuesday, Dockham said he believes the city will remain within its budget for bulk power this year.

"It's very close. The bulk power estimates are very close to what its going to cost to procure it."

He said the rest of the city's power needs will cost about $11 million.

Despite what seems to be bleak news concerning power prices, Dockham said some experts are saying prices should drop in the future.

"You're dealing with a commodity and prices can go up and prices can go down," he said. "It's moving around at a daily basis."

In addition to securing the rest of the city's power supply, Dockham said he's also been charged with making recommendations on the city's future power purchasing strategies and developing a risk management plan.

Long-term strategies and a management plan are two methods used by Roseville Electric, and Dockham said he will try and develop something not unsimilar for the city of Lodi.

"Most utilties either are, or have put in place, a strategic or risk management plan," he said.

City Councilman Bob Johnson said he's encouraged by the choice of Dockham to step in and manage the utility because he thinks it could draw the city closer to the Norther California Power Agency.

He said Lodi may have avoided some of the mistakes of the last few years if its electric utility had been in better tune with the agency.

But Johnson added he really isn't interested in how the city's Electric Utility got to where it is, rather how Lodi will crawl out of the hole.

"The cost of the juice is continuing to rise," he said. "How are we going to address that if we don't have a surplus?"

Contact reporter Andrew Adams at andrewa@lodinews.com.

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