Municipally Owned Utility Boards

1. Municipally Owned Utility
Boards
November 8, 2018

2. Municipally Owned Public Utility
• Specialized municipal operation
• Enterprise activities of the local government
• Operates as a municipal business generating its own
revenues that fund operating expenses and more
• It is a primary responsibility of the governing body to
ensure the short- and long-term viability of the public
utility
• The governing body’s charge to run a “business-like
operation” is critical

3. Reasons to Review and Update the Current
Governance Model
• A board may help focus on utility issues
• The electric utility is a complex operation
• The electric utility competes with other electric
entities for scarce resources

4. College Station Utilities at a glance:
– Number of electric meters served: 42,658
• Residential: 39,212
• Commercial: 3,416
• Master Metered: 30
– Annual Revenues: $105 million

5. American Public Power Association
• 2015 Governance Survey
• Determine the type of control local
governments exercise over publicly owned
electric systems
• 534 utilities responded (out of 1,900 publicly
owned electric utilities)
• Governing entity-
– City Council: 56%
• 14% utilize a Citizens Advisory Committee
– Independent Utility Board: 44%

6. APPA Significant Findings
• 43% of respondents with 20,000 to 50,000
customers are governed by City Councils
– 57% are governed by an Independent Board
• The incidence of electric utilities with a
citizens advisory board increases by customer
size class

7. Texas Public Policy Association
• 2012 Governance Study
• 66 utilities responded (out of 72 publicly
owned electric utilities)
• Governing entity
– City Council: 68%
• 25% utilize a Citizens Advisory Board
– Independent Utility Board: 32%

8. TPPA Significant Findings
• It is more common for large and mid-sized
utilities to be governed by an independent
board
• Council retains rate setting, bond issuance and
eminent domain authority in 88% of the
utilities with an independent board

9. Governance Models
• City Council
• City Council- Advisory Board
• Independent Utility Board

10. Current Governance Model-
City Council
• College Station Utilities
• Garland Power and Light

11. City Council Powers and Duties
• City Council is the governing body
• City staff makes recommendations to Council
on:
– Long-term Electric policy
– Annual Electric budget
– Electric rates
– Purchased power contracts
– Capital Improvement Projects

12. City Council- Advisory Board
• Bryan Texas Utilities
• Georgetown Utility System
• Denton Public Utilities
• Austin Energy

13. City Council- Advisory Board
Powers and Duties
• Staff meets with the board on a regular basis
• Board makes recommendations to Council on:
– Long-term Electric policy
– Annual Electric budget
– Electric rates
– Purchased power contracts
– Capital Improvement Projects

14. City Council Governance Model
Pros
• Direct accountability to citizens/ratepayers
• Direct impact on planning and policy issues of
the utility that impact the community
• More integration/synergies/coordination on
policy issues between the utility and the other
city departments

15. City Council Governance Model
Cons
• Potential for politics to be injected into
running the utility
• Council members may not have expertise of
the utility operations
• Council members must focus broadly on many
City issues
• May focus on the City’s financial needs,
possibly with less focus on utility finances

16. Independent Utility Board
• New Braunfels Utilities
• Lubbock Power & Light
• San Antonio City Public Service Board
• Brownsville Public Utility Board

17. Chapter 402, subchapter G of the
Texas Local Government Code
• TRANSFER OF MANAGEMENT AND CONTROL
OF ELECTRIC UTILITY SYSTEM. (a) A
municipality by ordinance may transfer
management and control of the municipality's
electric utility system to a board of trustees
appointed by the municipality's governing
body. (b) The municipality by ordinance shall
prescribe: (1) the number of members; and (2)
the qualifications for appointment to the
board.

18. Independent Utility Board
Powers and Duties
Board serves as primary governing body independent from
City
– Set electric rates*
– Approve Electric budget
– Make financial investments for utility
– Approve purchased power contracts
– Appoint Electric Director
– Set salaries of key utility officials
– Exercise right of eminent domain*
– Issue long-term bonds*
* indicates the majority of independent utility boards do not
have this authority

19. Independent Board- Pros
• Singularly focused on the utility
• Members can be selected based on qualifications
• Can enhance the business orientation of
governance
• Can reduce injection of politics into running the
utility
• If longer terms than Councilmembers then more
stability and better long range planning
• Could be viewed by the rating agencies as a
positive

20. Independent Board- Cons
• Less direct control and involvement by Council
• Could be less accountable to citizen/ratepayers
• Some synergies with other City Departments
could be lost
• Transitioning to a board would require attention
to costs, transition time, and other issues
• A board could be perceived as just another layer
of management

21. Considerations
• Number of members
• Member qualifications
– Residency/ utility customer requirements
– Professional requirements
• Term length
• Term limits
• Compensation (independent board)

22. Council Direction
• Maintain current structure
• Further investigate advisory board*
• Further investigate independent utility board*
*indicates use of external consultant to further
investigate these options