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Council examined CSU budget

October 22, 2013 Updated: October 22, 2013 at 8:10 pm
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The recent editorial on Oct. 17 in The Gazette took the City Council to task for spending too much time and getting too far into the details of the $246 million city budget and cautioned us to spend at least as much on the $1 billion CSU budget. The editors feel that the council/board should carefully review the rate increases.

I couldn't agree more. Our CSU budget absolutely must be scrubbed, service by service, and the details behind any rate increase justified to at least as great a detail as the city budget is being subjected to scrutiny.

So what has your City Council, doubling as the CSU Board of Directors, been doing and why does CSU need a rate hike?

To increase engagement in and oversight of the organization, three board committees were established including finance, personnel and strategic planning.

The board's new finance committee analyzed the complex and regulatory driven utility budget. This included many meetings and hours of review, dialogue, and questions for staff. Committee members also studied numerous financial reports and detailed budget documents.

We reviewed the regulatory requirements; prioritization processes for capital projects; rating agency criteria for financial stability; risks; and balancing price impacts with investments needed to ensure long term reliability.

The budget was reviewed by service - electric, natural gas, water and wastewater. We scrutinized fuel, production and treatment, transmission and distribution, operations and maintenance; administrative and general; capital improvements; debt service; and transfers to the municipal government.

We reviewed capital investments required to comply with new environmental regulations while working to keep electric rates as low as possible.

Every proposed project was evaluated on how it met regulatory requirements, reliability and customer satisfaction. Many cuts were made in the electric service, reducing an originally submitted 8 percent electric base price increase to 5.5 percent (3.4 percent impact on the bill.)

This process also reduced and deferred $35.4 million in planned capital investments in all services and with an additional $5.6 million reduction in operations and maintenance.

The personnel committee scrutinized the labor and benefits budget. The recently completed salary study showed that 64 percent of employees are below the market, due in large part to limited or no pay increases for five years. Any increase in pay is based on employee performance and comparison to market. Medical plan design changes will shift more costs to employees. CSU began reducing employees five years ago and currently operates with 200 fewer positions while serving thousands more customers.

So why does CSU need the rate increase in water, electric and natural gas? In water, the increase was previously approved in order to fund the construction of Southern Delivery System (SDS), which is significantly under budget and ahead of schedule. Previously approved rate increases will probably not be needed. SDS is being built to serve Pueblo West, Security, Fountain and Colorado Springs expansion. Without SDS, we would likely need mandatory water rationing before 2020 because of insufficient delivery capacity.

Natural Gas and Electric need to replace aging equipment, pipes, etc. The biggest component is for the required emissions controls for Drake and Nixon, our two coal powered plants. These are EPA required additions to the emissions controls already installed. Both plants currently meet or exceed all required emissions standards and the new controls are needed to meet new requirements. Approximately 40 percent of our current generating capacity is from coal, as in the rest of the country. We simply have no other choice without locking in massive rate increases for new plants or purchasing from the grid at the same time the rest of the country shuts down 40 percent of power.

Your City Council has spent more than four times as much time on the CSU budget as on the city budget and to far greater detail. At no time has CSU staff ever produced a department budget line that summarized "operations" or "multiple trending lines" for millions of dollars, as the city budget has. The full board will review the budget and adopt rates only after a public hearing.

Mayor Steve Bach referred to us as the city's "board of directors" and we are performing the due diligence any board of directors would.


Andy Pico is a member of Colorado Springs City Council, District 6.

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