The shine is coming off this deal
THE CITY COUNCIL GOT
an indication last week that selling Plymouth Utilities’ electric operations won’t be nearly as easy as selling a used snow plow — and may not be the windfall for the city that some have made it out to be.
Thomas Unke of Baker Tilly Virchow Krause explained for the council what would be included in a $32,000 study of the electric utility portion of Plymouth Utilities that the city has requested his firm to undertake. That study will look at, among other things, the proposal floated by some on the council and some citizens to consider selling the utilities’ electric operations in lieu of investing in a much-needed new headquarters building for Plymouth Utilities.
Unke warned selling any part of Plymouth Utilities is not as easy as putting an ad in the paper, accepting bids from interested parties and handing the keys to the operation to the highest bidder.
There’s a little thing called the Public Service Commission of Wisconsin, which oversees utilities, both public and private, in the state. Any potential sale of any portion of Plymouth Utilities would have to meet their muster before it could go forward.
The PSC’s primary purpose is to protect the customers of all utilities. As such, they turn a very stern glance at any attempt to sell any utility for an inflated price in order to keep any profits for a buyer or seller from being passed on to the consumer, who should only pay for the service they get from their utility and not excess profits for stakeholders or owners. That’s true whether the utility is public or private, large or small.
Also, figures that have been bandied about in public meetings and private conversations claiming that Plymouth Utilities is worth $75 million or thereabouts were shot down last week as well. The annual audit presented by Baker Tilly Virchow Krause showed a book value for Plymouth Utilities of only around $56 million — considerably less.
And that total includes all of Plymouth Utilities’ assets and operations, including its wastewater and water utilities as well as the electric operations. The wastewater and water utilities account for a greater portion of Plymouth Utilities’ tangible assets — buildings, equipment, etc. — meaning that the true value of the electric operations is more in the neighborhood of $22 million. Not quite the huge numbers some were dangling in their conversations.
The electric utility is where Plymouth Utilities serves the greatest number of non-city residents. In fact, roughly 44 percent of the annual electric revenue comes from customers outside the city limits. That’s a significant stake in the electric operation that lies outside the city proper and must be given appropriate weight in any decision about the future of Plymouth Utilities.
Also to be considered are issues such as the impact of a sale on customer rates — which are currently below the statewide average — and the impact of a sale on employees as well electric users large and small.
Unke noted that his firm has conducted similar studies considering potential divestitures for a number of other utilities throughout the United States over the years. When asked how many of those resulted in a sale of the utility in question, he could think of only one — and that was a public utility in Texas reacquiring a wastewater utility it had previously sold.
The study will go forward and it will be interesting to see what the results will be. But to this point, it would appear that some of the bloom is coming off this rose and what some were trying to pass off as a sweet deal is starting not to smell so sweet.
At issue: Something or other Bottom line: Do something about it
