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Show i i;l oCEi3 i Oil if G S Feassbslif pii6Tcials Information regarding the recentyly completed Power Feasibility Study for Cedar City ' Corporation has been released this week in a question and aaswer form from City Manager, John Hen-drickson. Hen-drickson. The Cedar City Council will place the question of whether or not Cedar City should negotiate with CP National (formerly California Pacific Utilities Co.) to possibly purchase their facilities and create a municipal power system. The following questions and answers an-swers have been prepared by the City for citizens to review prior that election on November 7. Q. Why does Cedar City want to negotiate the purchase of CPN? A. Because we always search for lowered costs. The power feasibility study indicates that a municipal system could realize some cost reductions. Q. Does this mean that CPN is a poorly run system? A. No. In fact, CPN has done a very good job in operating it's present system. However, CPN is a broker and distributor of electridcal power and therefore is in the business of making as much profit as allowable. It supplies power for a fee just as any business supplies its service for a fee. This is a natural business practice, but it is this profit that the feasibility study indicates will absolutely be saved by changing to a municipal system. It must remember that utilities are "public utilities", whether they are investor owned or publicly owned and therefore are different from being classified as strictly private enterprise. Q. Why are Cedar City's power costs greater than other areas? A. The answer lies in the following elements of the power cost: Power Costs: Operating costs (Power Purchases, Transmission and Distribution, Administration). Return on Money (Investment) (9.55 percent on investment) Taxes Paid (4.8 percent) Depreciation, (2.7 percent) 1. The cost of power is twice as much to CPN as to St. George because of Colorado River Storage Project (CRSP) cheap Hydro Power purchased pur-chased by St. George. - 2. St George (a municipal) has no profit to pay. 3. St. George (a municipal) has no tax to pay.. (There is a loss of property and franchise taxes locally, but these are offset by bringing business and industry into area by lower rates). 4. Administrative expense can be a saving by decreasing the overhead through local management. 5. Cedar City must buy power from CPN who in turn buys power from 1 UP&L at wholesale rates. These rates are substantially higher than CRSP rates. Q. What alternatives does Cedar City have to lower power costs? 1 . To sepa rate f rom CPN and form a municipal utility. (This would result, in at least 10 percent reduction of power costs - see table) partly because it pays no profit and partly because no taxes and from reduction of administrative costs. 2. To separate from CPN and unite with other communities within the service area. This would take over transmission and secure firm assured power sources. (It is estimated that this option would save at least 20 percent - see table) partly because of Continued on Page Three v Pros and Cons Continued from FrontPage municipal operation and partly IxH-ause owning the transmission system. 3. Negotiations with L'PL to buy the CI'N system might result in a lowering of costs if UPL would apply a system average price-but this would be short term, because power costs will rise because of full costs. CPN's operations in Utah represent only 9 percent of its total revenue. One-half of the power carried on CPN's transmission line is wheeled power. The average all-electric home uses 18,000 kwh in a year. It costs CPN about $315 to buv this power. St. George bought it for $115 - a saving of $200. Cedar City requested and received an authorization to receive 8.6 megawatts of hydro power from the Colorado River Storage Project, but never followed through. Perhaps the authorization can be revived. In the last rate case the PSC authorized CPN to collect about $1,200,000 for return and income tax on return. A Cedar City electric utility could reduce the carrying charges about 25 percent. SUPA could eliminate about one-half of this carrying charge. CPN pays UP&L $800,000 per year for return and other carrying charges for UP&L's Sigurd to Iron County transmission line. If SUPA owned the line, you would not have to pass on the 16 percent return on its investment. It costs the residents of Cedar City more for CPN to operate the four hydro plants than it would to buy the power from UP&L. Perhaps new life can be put into these plants to make them pay their way and actually reduce power costs. The Pumper's summer load helps to balance the home owner's winter heating load. Two separate utilities may create problems. With the two together in SUPA, lower power costs can be achieved. The 138 kv transmission line from Parowan to Cedar City has to be looped to handle growing loads. If CPN builds it, it will cost residents of Cedar City more money. If SUPA builds it, it will still cost money, but the residents of Cedar City would not have to pay CPN 13.25 percent return and the income taxes that go with it. Most of CPN's books and records and the decisiion making is done in San Francisco. Bringing them back to Utah will save money. CPN's Administrative Ad-ministrative and General salaries have doubled in the last three years. Bringing control back to Utah will help to keep them from redoubling in the next few years. |