BY ROBERT B. GIBSON
Chair
Board of Public Utilities
Question #3 (the very last one) on this year’s Los Alamos election ballot is simple. Its full explanation is not.
The question asks voters whether or not to repeal a provision in Sec. 509 of the County Charter, effectively the County’s constitution. That provision currently shuffles some funds back and forth inside County government with no net effect on taxpayers or Utility customers. Section 509 lists the types and priority of allowed Utility expenditures. It includes the expected annual expenditures for operations, capital items, debt service, and reserves. The provision at issue is the final one, “All remaining operating profits shall be transferred to the County General Fund.” The General Fund is the “bank account” for most general County operations.
The term “profits” is semantically problematic. Governments may have residual funds but don’t make profits.
Even without “profits,” the provision has a deeper problem. The Charter separates Utility finances from those of the rest of the County. This Sec. 509 provision is an exception. When Los Alamos was developing a charter in the late 1960s, County government was far smaller than it has become. Utilities was a much larger fraction of it. Citizens feared elected politicians would hike utility rates rather than politically unpopular taxes to pay for general county operations.
Voters defeated the first proposed charter, largely because of that concern. A new charter commission started over.
The structure they devised is the one we have today. Utilities is not directly overseen by County Council, but rather by a separate semi-autonomous body, the Board of Public Utilities (BPU). Utility finances are separate from those of the General Fund. In fact, each utility (electricity, gas, water, sewer) is a separate sub-fund. None of these funds mix. BPU develops Utility budgets and sets rates (with Council concurrence) strictly to meet the needs of Utilities.
The “profit” transfer is an exception. For three decades, Utility “profits” were determined in
various ways.
In 1997, in an effort to standardize, County Code was amended to direct transfer of 5% of electric and gas revenues from residential and commercial Utility customers to the General Fund.
That isn’t really a residual or a profit; it is an expense built into everyone’s electric and gas bill. Recently, it has been around a million dollars annually.
Beginning in 2020, a temporary provision in County Code allows, but does not require, Council to transfer any or all of that money back to Utilities “for purposes designated by the Council.” Council has done that and extended its authority to do so a year at a time.
The ballot proposal, if passed, would: (1) eliminate the “profit” transfer which is inconsistent with a non-profit government entity; (2) eliminate the offsetting transfers from Utilities to the General Fund and back again along with their associated administrative efforts; (3) eliminate the possibility of the discretionary transfer back to Utilities being discontinued, effectively raising electric and gas costs and thus rates by 5%.
The only effect on current utility rates might be some small trade-offs among the different utilities. The net “bottom line” effect on most customer’s bills would be negligible.
It is rare that a government proposes to actually simplify its processes and also eliminate a potential driver for future cost increases to citizens. Question #3 is that rare example.
Author’s disclaimer: This article represents the individual views of its author, not those of the Board or Department of Public Utilities.
Editor’s note: This column was sent to the Reporter by DPU staff.