The Grand Haven Board of Light & Power reviewed a proposed $38 million budget for the fiscal year 2024 during its regular board meeting Thursday night. David Walters, general manager, and Lynn Diffell, finance manager, provided a detailed presentation outlining the balanced budget. Power supply costs remain relatively flat for the upcoming fiscal year at $19.3 million. The 5-year Capital Improvement Plan, which is largely made up of investments in the distribution and transmission systems, is projected to be $24.8 million. Walters and Diffell presented that base electrical rates would remain stable for the year. A surcharge to save for environmental cleanup is under consideration.
Vice Chairman Gerry Witherell commented, “Ten years ago in Fiscal Year 2014, we collected $37.4 million in revenues from our customers. So, for staff to come back a decade later and tell us that we only need to collect slightly more for the year ahead is an impressive demonstration of stability. It also illustrates the level of effort the current management team has put into controlling our costs and using every revenue dollar effectively.”
One of the largest factors contributing to the stabilization of costs has resulted from moving away from JB Sims coal plant, an expensive single generating resource that was at the end of its useful life, to a diversified power supply portfolio buying 100% of power supply from the electric markets. The presentation detailed that while electric markets have gone up in the past two years, it is still the most economical option available for supplying power. Additionally, the utility achieved significant savings from restructuring its workforce and reducing it by 41.7% over the past five years, from 72 to 42 full-time employees through attrition.
Lynn Diffell presented that while many other communities are struggling with unfunded liabilities due to legacy pension costs, the BLP developed and followed a financial management plan over the past seven years to properly address these commitments.
“We have been following a proactive plan with a goal to reach a 100% funding level in the defined benefit pension plan. The pension plan liabilities are now almost fully funded, which is a healthy sign of following good financial management principles,” said Diffell.
David Walters made a recommendation to set aside and restrict $16 million for environmental remediation on the former Sims Site located on Harbor Island. “Having the Board designate these funds as ‘restricted’ protects this money from being used for other purposes in the future,” said Walters.
Additionally, Walters recommended adding an incremental surcharge to monthly bills to begin recovering increased environmental costs resulting from combustion coal residuals findings of the recently completed drilling program on the former Sims Site.
“If we take a proactive approach using small incremental steps now, it will minimize the monthly impacts to our customers. If we wait and do nothing as everyone watches these costs increase, then the impact will be more of a shock to our customers and make it harder for them to adjust.”
“Previous Boards made a commitment to fund the cleanup of environmental contamination that took place over 40 years ago when environmental regulations were much different than they are today,” said Chairman Westbrook. “We need to continue with that same level of commitment in a manner that minimizes the impact on our customers. If the city, which is now managing the clean-up of Harbor Island in a holistic fashion, can do so in a less expensive manner or is successful in getting grant money, then any money collected from our customers, and ultimately set in these restricted accounts, will be returned to them.”
The Board, following prudent financial planning principles, also established a necessary minimum cash reserve level to ensure the electric utility can continue providing reliable, affordable, and sustainable power for the approximately 15,000 residential, commercial, and industrial customers in the City of Grand Haven and the surrounding area.
