Oronogo residents attending the town hall last Thursday question whether the city’s getting a good deal in selling its gas system.
Is Oronogo getting a fair amount from Spire to purchase the gas system?
Aldermen think so, and voters will decide if they agree on Nov. 2; Missouri PSC will judge the fairness of the price if the proposal is approved
Mayor Charles Wilkins (far right) presents the reasons why he favors accepting Spire’s offer.
The proposal to sell Oronogo’s natural gas system to Spire was explained by officials and scrutinized by the public during a town hall meeting Thursday at City Hall.
Oronogo residents will have a chance to approve the sale when it comes to a vote on Nov. 2.
The Oronogo Board of Aldermen approved an ordinance putting the matter before the voters on Aug. 9. If approved, Spire will pay the city $510,000 for the system plus reimburse the city for expenses to date for installing gas lines to more than 700 potential customers in the Greystone II and Hawthorn Hills subdivisions. The reimbursement amount will change. At present, it is estimated to be $110,000, which would bring the total price to $620,000.
Also, Spire will pay a franchise tax to the city while its 20-year license is in effect.
“The natural gas system is a complex system, and the city doesn’t specialize in natural gas” said Mayor Charles Wilkins. “Therefore, we feel it is best to leave it to the professionals.”
“I think Spire’s getting a hell of a deal,” considering the condition of the system, said former mayor Ron Hall, who was among about 20 in the audience.
Wilkins said the bids of both Spire and Liberty Utilities, which approached the city to purchase the system, were in the same ballpark.
He made it clear that it was the two companies “approached the city on their own,” as long ago as when Hall was mayor. Hall agreed.
Cliff Garrett and Ryan Conley represent Spire at the town hall.
And Cliff Garrett, representing Spire, said, “We have to keep the check within an amount we believe will be approved by the PSC (Missouri Public Service Commission).”
If voters approve the sale, Spire will then seek approval by the PSC, which will among other things appraise the system to determine whether the price paid is fair.
Bob Russell, a former member of the board of aldermen, agreed with Hall. “In my opinion, that ($620,000 total) sounds a little cheap.
He wanted to know how the $620,000 and $283,000 in the gas fund will be spent if the sale goes through.
“You’ll have free rein to spend that money,” Russell said. “How’s it going to be tracked?”
Suggestions on how to spend the money included improvements to City Hall, parks and storm water drainage.
City Attorney Derek Snyder has pointed out that current board members cannot bind future boards to spending agreements.
Considering the 700 new houses, of which the city hopes 75% will become gas customers, it was asked if board members are sure they’re not giving up a lucrative business.Wilkins agreed with the assumption except that he said it would take 20 years for the city to recoup its installation costs.
Spire representatives said it’s likely a new 6-inch line will have to be installed to supply Hawthorn Hills.
Wilkins said the city has qualified operators now but can expect a high turnover rate because of higher wages offered elsewhere.
“We’re walking a tight rope to maintain the service while keeping it affordable,” said Wilkins.
The city currently has 266 customers supplied with 8.1 miles of plastic pipe. They accounted for $181,987 in sales revenue last year. And Wilkins said the city would have made $20,000 if not for the $59,700 that was spent on extending service to the first phase of Greystone II.
The feasibility of extending gas service to Greystone II and Hawthorn Hills was questioned. The alternative would be for the the developments to be all-electric or installation be left up to the developer or new home owners.
Snyder offered a couple of scenarios if the proposal doesn’t pass. First, the city could opt not to extend gas service to the large new subdivisions. Second, the failed vote could reduce buyers’ interest, resulting in the city having no choice but to keep the system.
Millie West, a former mayor, asked the board to keep in mind residents who can’t afford utility cost increases.
Wilkins warned the rising wholesale price of gas this winter will cause bills to go up whether it’s distributed by the city or Spire.
The board has directed city staff to pass on the anticipated monthly wholesale price increases to customers without further action by the board. Of course, cost reductions will be also be passed on.
That’s one difference between the city and Spire, which is restricted by the PSC from adjusting its rate to recover wholesale costs more than three times each year.
Garrett estimated the average residential customer in Oronogo would pay $10 less per month if Spire takes over.
However, that was disputed by a resident who receives a bill from Spire and a bill from Oronogo each month.