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Show r11 1 . : Power Federation hears engineer report Ford, Bacon and Davis' study prepared for the Southwest Utah Power Federation concludes that a fair market value for CPNational (formerly California-Pacific Utilities) would be $11.47 million including the Cedar City system (which was valued by Ford, Bacon and Davis at $3.3 million). Their estimates predict that a locally owned Southern Utah Power Authority would result in a 22 to 25 percent savings for residential users. A study j done by the same firm for Cedar City last month concluded that a 10 percent per-cent savings could be realized by a municipally owned system and a 20 j percent savings realized through membership in a large federation. "The only thing the study shows can minimize some of the rises in power costs is to bring it back to the local level. However, there will also always be a transitional period before these savings are realized," stated Dr. John Baliff representative of the consulting firm. Possible savings j A local non-profit utility company would be able to cut business costs and thus rates by being able to buy I power cheaper, cutting out local taxes on power, and bringing the accounting ac-counting department and insurance back into the community. Reasonable power rates would be insured in the future by the proposed SUPA wielding j its own power and eventually which will be an estimated $9 million for 1978. However, Mr. Paris stated over the phone that "prices will be developed if and when negotiations take place." Mr. Paris 'reacted strongly to the study's $11.47 million estimate, "In my opinion that is the same as confiscation con-fiscation of property. We're not going , to allow someone to steal the owner's property." He also cited the acquisition by several public bodies of utiltiies in Oregon from Pacific Power and Light as a precedent for high price formula. According to local CPN executive Leon Johnson, the Ford, Bacon and Davis study does not consider the inflation factor. The CPN dollars which bought the system in 1958 were worth more than the present dollar. Dr. Baliff stated that a local utility could possibly continue to purchase power initially from Utah Power and Light since CPN's contract with them continues through 1983. He felL that financing would be available "based on a reasonable price" under the Interlocal Cooperative Act which provides funds for municipal systems and Rural Electrician Assn. members for purchasing such systems as CPN and other expansion needs. Possible Outcome If the large discrepancies between the study's suggested price and CPN's asking price cannot be solved in negotiation, a fair price may have The study arrived at the $11.47 million figure by subtracting the original cost less the depreciation. When questioned Dr. Norman Morck, also representing Ford, Bacon and Davis at the presentation on Friday night, stated that this formula has a legal precedent in the sale of Southern Utah Power's utility system to California Pacific Utilities in 1958. However, any cost savings of significance would be cancelled out by the system's price being double or triple the study's figure. The study did not include the purchase of CPN's hydro electric plants in their figures since the land costs of the 1700 acres which they are located on would greatly offset the value of the outdated equipment which is costly to maintain and operate. Cost of System Baliff stated that CPN announced a $49-50 million price tag on their entire system. In a discussion between Pete Paris, vice president of CPN, and Rudger McArthur of the St. George Municipal Power System, they had considered the basis for valuing a utility property at five and a half times its gross annual revenue 10 oe aeciaea Dy me courts, as a political entity the federation would be allowed to go into "condemnation" forcing both parties to accept the impartial decision of a third party. Dr. Baliff complimented CPN, "I give credit where it is due and these people have done a good job... they have to buy expensive power. The whole issue comes down to the question of whether you want to be your own master, and it may take the cost effective and feasible to do this. Investor owned utilities are guaranteed a profit while public utilities have the incentive to keep costs down because they are passing expenses on to themselves." During the question period Arlo Larsen, Cedar City Councilman, requested that the firm send a letter to the city explaining discrepancies in the costs of the federation's feasibility study and Cedar City's feasibility study. The federation study cost $25,000 versus Cedar City's $50,000 cost. A meeting on Wed. Nov. 8 is scheduled with the Washington REA to discuss financing of the system. All mayors and other officials are invited to attend the meeting which starts at 6 p.m. in the Cedar City Library basement. |