Don’t go away…
A report compiled recently by a Sherwood volunteer committee charged with making recommendations about what electric utility should provide 7,000 customers service for another generation also looked at how the decision would impact municipal government operations.
"An analysis and consideration of the proposals of the three respondents and the facts surrounding this issue would not be totally complete without considering the effect of the decision on city government operations and the revenues generated thereto by the franchise fees collected and paid to the city," states the report.
According to the report, all three utilities of Energy of Arkansas, First Electric Cooperative of Jacksonville and North Little Rock Electric pay Sherwood a franchise fee levy of 4.25 percent.
"Additionally, Ordinance 710, which was passed in 1985 equalizes all franchise fees for any electric utility in Sherwood and sets the amount at 4.25 percent," according to the report. "Consequently, all three respondents have agreed to a franchise fee of exactly the same percentage of receipts. In addition to the traditional franchise fee, [North Little Rock] proposes an annual tariff, which is not passed on to [its] customers, but paid from the profits of the utility company, will continue to provide at least that level of funding to the city of Sherwood."
The report states that neither Entergy nor First Electric has shared any portion of their revenues with the city of Sherwood nor have shown an interest or ability to do so if they should be successful in gaining the current customers of North Little Rock Electric.
"The committee believes that, based on recent budget levels, if that money is not received in the future, some means of replacing it either by additional taxes or fees will need to be found," states the report. "The effect of that action would be to shift that revenue from the profits of [North Little Rock] from their Sherwood operations and place that financial burden on the wallets and pocketbooks of all residents of Sherwood who pay utilities or own property by means of increasing other fees or taxes."
The committee also studied the issue of how long of a commitment Sherwood would make to whichever utility is chosen.
"Finally, the one issue on which the committee reached no consensus was the term of the franchise contract, regardless of what respondent is chosen," states the report. "Three members saw no problem with 40 years and two preferred a shorter term."
In reviewing past franchise agreements, all agreements with First Electric which date from January 2003 to September 2008 are for 40-year terms and appear to have been passed unanimously and without discussion, states the report.
"The only franchise agreement that, working with the city clerk’s office, the committee could find regarding [Entergy] was Ordinance No. 265 passed in 1973 for an indefinite term," states the report. "It is now nearing 40 years since passage. The committee notes that the legal description in Ordinance No. 265 does not conform with the area that Entergy now serves, and that copies of Entergy residential bills that have been reviewed do not reflect the 4.25 percent franchise fee, but rather 4.7572 percent. This is mentioned only because it has come to light during the committee’s work. This is not an issue for the committee, but rather one for the council to investigate and remedy as necessary."
After the committee finished meeting, one of the members called to suggest that the panel consider the request from First Electric Coop CEO Don Crabbe and award the franchise agreement for 36 years.
"Mr. Crabbe suggested, if FEC was chosen, he would prefer a 36-year franchise to coincide with a current agreement in effect since 2008," according to the report. "It was suggested, by this member, that any agreement, regardless of the provider, be for a term of 36 years to cause all to expire at the same time, rather than consider parts of the city separately."
Committee Chairman Jim Davis added in the report, "It was requested I poll the committee members on the idea. The poll indicated four members favoring the idea and one still favoring a shorter term."
The report also studied the prospect of if someone other than North Little Rock Electric is chosen, how who would pay the cost of buying its infrastructure in Sherwood.
"That remains a largely speculative cost which could be a major economic impact, and which [Entergy] intends to pass on to ratepayers," states the report. "Whether those ratepayers will be throughout Arkansas or only in Sherwood, and how that cost may be attributed, remains an unknown factor in the eyes of the committee. [First Electric] did indicate that if they were chosen, and acquired the infrastructure, the cost would not be directly charged to Sherwood ratepayers. Further, subsequent to the joint meeting, [Entergy] has made additional unsubstantiated claims of tremendous savings for large commercial customers and all customers at large."
The report adds, "The committee wonders how, if electric rates are such an integral factor to be considered in business location, one can explain the intersection of U.S. Highway 67/167 and McCain Boulevard and approximately a one-mile radius from that area, consisting of one of the largest concentration of retail and restaurant businesses in the state. And just a little farther to the southeast of this location is the largest hospital and medical campus in Central Arkansas north of the river."
North Little Rock Electric services that entire area.