CAUGHT ! – MLGW on the Record

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Regarding this MLGW proposed 12% electrical rate increase, MLGW City Council public record testimony is riddled with inconsistencies. And MLGW Commissioner Mitch Graves, after remarking the capital budget is never, ever, ever spent, labeled the FY24 capital budget, based on history, “not reality”. See 01:47:30 in the video.

These on the record inconsistencies point to the need for a forensic audit, while eliminating the need for a rate increase. Let’s take a closer look and if you are confused, it is understandable.

CAUGHT ! – On July 11, 2023, at 00:30:55 in the City Council MLGW Committee video, regarding a 5 yr. $228M tree trimming contract, MLGW CEO Doug McGowen said,  “I am not asking for more [rate increase] and want to thank Councilmembers that saw the wisdom of that increase [previous electrical rate increase]. I know it’s always a hard decision.” And at 00:34:00, McGowen reassures Councilmembers, that MLGW would fund tree trimming with existing funds by saying, “We have the money from under execution.”

CAUGHT ! On July 11, 2023, at 00:38:15 in the City Council MLGW Committee video, when asked the appropriate action for ratepayers to take when the power goes out, McGowen arguably provided the wrong answer by saying, “The answer is call.” Wrong answer because outages can be reported online without driving up call wait times, while decreasing customer service costs.

CAUGHT ! On November 7, 2023 in Memphis City Council MLGW Committee, At around 00:02:06, MLGW CEO, Doug McGowen presents a slide that shows a 128% increase for a 5-year tree trimming budget going from $100M to $228M. That is a $128% increase. Then Mr. McGowen, discussing tree trimming, states “our peers alike are seeing a 60%-70% increase for this function [tree trimming]”. Why the difference between 70% and 128%? And can anyone believe, that McGowen is leading with tree trimming, as a primary basis for the 12% rate increase, after assuring the City Council in July, that MLGW had the funding for $228M in tree trimming, without a rate increase?

Next, based on FOIA peer requests to Nashville Electric Service and Knoxville Utility Board, even the claimed peer increase of 60%-70%, per McGowen testimony, in tree trimming costs, is shown to be inflated and not connected to reality.

Knoxville’s tree trimming budget, FY23 to FY24 increased by 20.3% from $13.5M ($13,538,349 ) to $16.3M ($16,295,914). Much of this budget increase is due to a 37% increase in planned production. Nashville’s FY24 budget dropped by 5.1% from $20.8M ($20,835, 839) in FY23 to $19.8M ($19,782,993) in FY24. The FY23 number assumes $2,597,380, in administrative costs, provided by NES via FOIA for FY24 only.

Had the NES administrative costs not been assumed for FY23, the FY23-24 tree trimming budget decrease would have been greater for NES. In fairness to this evaluation, NES did see a 17.5% FY22-23 per mile increase. But a 17.5% increase, is a long way from McGowen testimony at 70-128%. See references.

Recent tree trimming benchmarking, excluding administrative costs, showed MLGW budgeting 100% more than Nashville (NES) per tree trimmed mile, at $33K vs $16.5K for NES and 173% more than Knoxville (KUB) at $12K. Local IBEW 1288 approximated $10K per tree trimmed mile. Nashville per mile rates also include mowing. See references below (JustMyMemphis).

CAUGHT ! – Electric Capital Spending Budget

CAUGHT ! Next, on November 7, 2023, at 00:51:45, upon questioning from Madam Councilor Cheyenne Johnson, MLGW CFO Dana Jeanes testifies to have spent $520M in electrical capital expenditures. Yet via MLGW FOIA response (pg. 3), as of the end of FY23, on June 30, 2023, only $296.1M ($296,061,545) had been spent from FY21-23.  Further, McGowen’s earlier MLGW PowerPoint slide at 00:04:53 shows $172M being spent on electrical capital expenditures. See the inconsistencies? There is a range from $172M to $520M for to date electrical capital expenditures, included in testimony. Also, no rate increase needed to fund the $120.5M for generation and storage initiatives.

This is why, for this important deliberation, production is needed, of current MLGW financials, to include FY23 year end and current FY24 financials.  MLGW has refused to provide those financials via FOIA request.

Conclusion

The need for a rate increase is eliminated, by expeditiously fully spending the original $800M capital budget, right sizing the tree trimming budget, eliminating other unnecessary expenditures like $16.5M for paving and $18M for out-sourced customer service. And if activated, the $120.5M in generation and storage, as we know, can be done without a rate increase. Meanwhile, a forensic audit of MLGW is in order.

REFERENCES