City, NPU officials at odds over requested revenue increase
Norwich — Mayor Peter Nystrom’s call last week to increase revenues from Norwich Public Utilities from 10 to 12 percent couldn’t be done until at least the 2021-22 fiscal year and would require a rate increase on electric, water and natural gas rates to generate the revenue, NPU officials said Tuesday.
NPU General Manager John Bilda, who has returned from a medical leave that started in late November, said Tuesday any increase in the 10 percent revenue to the city would just be a pass-through cost to customers. The city charter requires NPU to turn over “not less than” 10 percent of gross revenues from electric, natural gas and water divisions to the city each year based on audited figures. The amount is calculated in expenses for each division when utility rates are set and are projected in the annual budget, Bilda said.
NPU’s 10 percent contribution totaled $8.489 million in the current 2017-18 fiscal year. The 10 percent amount to be paid to the city for 2018-19 already has been calculated at $8.475 million, a slight drop attributed to a drop in utility usage during last year’s warm winter, Bilda said.
In his State of the City address a week ago, Nystrom asked for an increase in NPU revenues “this year” as a new revenue source the city needs to offset cuts in state revenue now and in future budget years.
The City Council passed a last-minute resolution during the contentious budget meeting last June calling for NPU to turn over 12 percent of gross revenues starting in the 2019-20 fiscal year “and thereafter.” Nystrom acknowledged Tuesday that the increase could not happen this year, but said negotiations should start now with the Board of Public Utilities Commissioners to secure the payment for the 2019-20 fiscal year.
“It gives a year’s notice,” Nystrom said Tuesday, “so basically it gives you a year to negotiate. You can’t say they’re not given advanced warning.”
Nystrom said in the current “extraordinary time,” NPU needs to share in the budget cuts being asked of other city departments and the school system, which have downsized. Salaries and benefits for NPU employees are “far superior” to those on the city side, Nystrom said.
“They are part of Norwich,” Nystrom said. “They are an important part of Norwich.”
NPU's contribution to the city last was changed in 1965, when a charter revision changed the formula from 5 percent of total assets to not less than 10 percent of gross annual revenues, city Corporation Counsel Michael Driscoll said.
NPU officials said they already have calculated the electric, water and natural gas rates needed for the 2018-19 budget, and if the utilities commission approved increasing the amount, the new rates wouldn’t take effect until the 2019-20 fiscal year, and that revenue wouldn’t be audited until December 2020 for payment to the city in time for the 2021-22 fiscal year.
As they did when the council resolution was passed in June, NPU officials on Tuesday objected both to the request for increased revenue and the lack of direct communication from the City Council. In June, Bilda said if the increase is approved by the utilities commission, he would consider labeling it “2 percent City Council surcharge.” He said Tuesday he still would consider separating it out in the budget as a new line item.
Utilities commission Chairwoman Grace Jones said the commission never received a letter from the council with the June resolution to start the process. She only heard new Mayor Nystrom’s reiteration of that resolution by reading a newspaper story in The Day on his State of the City address.
“The thing I’m most concerned about is we’re responding to your newspaper,” Jones said Tuesday, “and we’ve received nothing from the City Council. Usually, we get a letter from the City Council saying, ‘This is for your review.’ That would be the concern about any major issue.”
Jones said it also “bothers me” that the initial resolution passed on June 12 wasn’t on the posted council agenda. The resolution was added late during the meeting under a suspension of the rules, with no public comment or advanced notice to the utility and the public.
“This all takes deliberation and time, no matter how the urgency is,” Jones said. “I don’t know how to respond to the State of the City address.”
Bilda said NPU’s 10 percent payment already is the highest among the 90 municipally owned utilities in New England and well above the 6.5 percent national average for municipal utilities.
Groton Utilities follows a 2003 city resolution that provides guidelines for revenue from Groton Utilities Electric Division, Director Ron Gaudet said. A formula designates a percentage of electric revenues that has averaged between 6 and 7 percent of total electric revenues in recent years, he said.
Bilda and NPU Division Manager Steve Sinko said the process of increasing the revenues to be passed on to the city would start with a cost of service analysis, which is conducted each time NPU proposes to change utility rates. The cost of service study was last done in 2016.
“It’s not simply writing a check to the city,” Bilda said. “It is based upon the cost of service.”
In the current $94 million combined budget for all four divisions — electric, natural gas, water and sewer — “payment to the city” is listed as an expense in the operating budget, along with a 5 percent “gross revenue tax” of $2.72 million paid to the state. Most of the payment to the city, $5.89 million, came from electric revenue, with $1.69 million in gas and nearly $906,000 from water revenue. Sewer costs are not included in the payment.
According to a chart provided by NPU, the 10 percent payments to the city have more than doubled in the past 20 years. In the 1998-99 fiscal year, NPU turned over $4.2 million to the city. That amount rose gradually until 2005-06, when the amount jumped to $5.38 million. The payment jumped to $7 million in 2007-08 and topped $8 million in 2012-13. The total dropped below $8 million for two years before climbing to $8.6 million in 2016-17.
“I certainly understand when you talk about sacrifices,” Jones said, “but you can’t just say ‘I’ll take it out of my children’s bank.’ I don’t see that as an easy answer. The utility has been there for the city and for the ratepayers.”
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