Red Flags surround the proposed $178M 12% MLGW rate increase before the Memphis City Council. The rate increase supports a lofty FY24 MLGW operating and capital budget that has MLGW effectively entering the telecommunications, paving and power generation business. The former is coupled with arguably included excessive contracts to support MLGW’s core electrical distribution business. Let’s examine these areas of excess:
Spectrum Radio Frequency $27M Purchase – This $27M purchase has MLGW entering the telecommunications provider business as opposed to leasing the signal from a provider. MLGW is proposing, through a FY23 $27M purchase, to own a 600mhz Spectrum communication band. Typically, this type of service is leased by non-telecommunication providers, such as MLGW. And based on MLGW’s FOIA response (pg.5), MLGW should lease, over 20 yrs, a 900 mhz signal band, to serve the desired MLGW function, costs $8.1M. FY24 Excess: $19M
The Paving Business – Another example of excess has MLGW seeming to enter the public paving business. This excess involves a 1yr. $16.5M MLGW paving contract. The City of Memphis entire paving budget is $15M. FY24 Suspected Excess: $8M
Power Generation Business – The plan is to bridge the gap generate and store power until TVA can meet peak demand in 2031 costing $310M. Seems strange that MLGW would be doing the work of TVA. Ideally, per McGowen, this will cost ratepayers nothing. But MLGW presentation (pg. 33) content shows capital expenditures in FY24 and FY25 totaling $461M against debt issuance of $360M that is to be used for power generation. As far as financial recoupment, the details are out and undefined. So, FY24 Estimated Excess $50M
Tree Trimming – On July 11, Doug McGowen, MLGW CEO, told City Council that the $228M tree trimming contract that he brought for Council approval would not be followed by rate increases. McGowen is now leading with tree trimming as a primary cause of the rate increase. FY24 Excess – $20M
Customer Service Contract – Recently McGowen touted a customer service supplemental contract to help reduce average customer service call wait times to 90 seconds for $18M over 5 years. The amount of the contract for FY24 is $5M. This contact comes before any promotion to educate customers that they can report power outages online. Reporting outages online would reduce call wait times. And besides customers are not expecting or demanding 90 second wait times. This contract is unneeded. FY24 Excess $5M
With $102M in excesses found above a rate decrease is in order.