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HomeMy WebLinkAbout2024-11-18 I11B Waukee Gas Utility - Alternatives to SaleAGENDA ITEM: CITY OF WAUKEE, IOWA CITY COUNCIL MEETING COMMUNICATION MEETING DATE: November 18, 2024 AGENDA ITEM:Consideration of approval of a Resolution Considering Alternatives to Sale of the City’s Natural Gas Utility FORMAT:Resolution SYNOPSIS INCLUDING PRO & CON: The City of Waukee is one of 51 communities within the State of Iowa to own a municipal natural gas utility. The utility was established in the City in 1966. Over the last several years, the Mayor and City Council have received concerns regarding the competitiveness of utility rates for Waukee residents in comparison to surrounding communities who do not have a municipal gas service. Prior to the City Council taking any action to consider the disposal of a public utility, the City must consider alternatives to disposing of the utility system in accordance with Section 388.2A of the Code of Iowa. FISCAL IMPACT INCLUDING COST/BENEFIT ANALYSIS: COMMISSION/BOARD/COMMITTEE COMMENT: STAFF REVIEW AND COMMENT: The City of Waukee has received concerns from residents and business owners regarding the competitiveness of the gas rates within Waukee as compared to rates in other nearby communities. The economies of scale between Waukee Municipal Gas and other public utilities serving a much larger customer base unnecessarily impact the level of rates associated with the provision of natural gas utilities to consumers. Additionally, with the significant amount of growth within the City as well as extreme weather events that have occurred over the last several years such as winter storm Uri, it has become evident that there is a large degree of risk in owning and operating a municipal gas utility. The City has considered alternatives to the sale of the utility including continuing operation, improvement and maintenance of the municipal gas utility and retaining a third party to operate and maintain the utility. Through our exploration, staff has discovered there to be no interested third-party utilities willing to operate the municipal gas utility while still being owned by the City. After thoughtful consideration, the City is not aware of any other feasible alternatives to achieving competitive rates compared to those in in neighboring communities except to consider the sale of the sale of the gas utility to a larger entity with a larger customer base. I11B RECOMMENDATION: Approve the resolution. ATTACHMENTS: I. Proposed Resolution PREPARED BY:Brad Deets, City Administrator REVIEWED BY: THE CITY OF WAUKEE, IOWA RESOLUTION 2024- RESOLUTION CONSIDERING ALTERNATIVES TO SALE OF THE CITY’S NATURAL GAS UTILITY IN THE NAME AND BY THE AUTHORITY OF THE CITY OF WAUKEE, IOWA WHEREAS, the City of Waukee, Dallas County, State of Iowa, is a duly organized Municipal Organization; AND, WHEREAS, the City of Waukee owns and operates a natural gas utility within the city limits of the City of Waukee also known as the Waukee Municipal Gas Utility; AND WHEREAS, a proposal to discontinue the city natural gas utility and dispose of said utility by sale shall not be submitted to the voters until the City complies with the requirements of Iowa Code Section 388.2A (2024); AND WHEREAS, Section 388.2A of the Iowa Code outlines certain procedures which must be followed for the disposal of a city utility by sale and one of those procedures requires the City Council to consider alternatives to disposing of the city utility system by sale; AND WHEREAS, the City Council has considered alternatives to disposing of the Waukee Municipal Gas Utility, as set forth in Exhibit A, attached hereto and incorporated herein as though set out in full. NOW THEREFORE BE IT RESOLVED that the City Council has previously and hereby further considers the alternatives to disposing of the Waukee Municipal Gas Utility as forth in Exhibit A. BE IT FURTHER RESOLVED that the City Council hereby finds that none of the alternatives to the disposal of the Waukee Municipal Gas Utility by sale are viable for the reasons set forth in Exhibit A. BE IT FURTHER RESOLVED there being no viable alternatives, the City Council hereby finds that the sale of the Waukee Municipal Gas Utility is in the best interest of the City, the ratepayers, and the residents. Passed by the City Council of the City of Waukee, Iowa, and approved this the 18th day of November, 2024. ____________________________ Courtney Clarke, Mayor Attest: ___________________________________ Rebecca D. Schuett, City Clerk RESULTS OF VOTE: AYE NAY ABSENT ABSTAIN R. Charles Bottenberg Chris Crone Rob Grove Anna Bergman Pierce Ben Sinclair EXHIBIT A CONSIDERATION OF ALTERNATIVES TO THE SALE OF THE WAUKEE MUNICIPAL GAS UTILITY The City of Waukee has experienced considerable growth over the last several decades. The City forecasts the growth to continue into the indefinite future. Continued growth places burdens on City infrastructure requiring capital improvements to expand the capacity of the Waukee Municipal Gas Utility as well as increasing supplies of natural gas to meet the increasing demand. In addition, the utility must also be able to serve the community in times of extreme demand when temperatures plummet such as during winter storm Uri in 2020 which requires further capital investment so that capacity exists to meet those demands and mitigate risks. During winter storm Uri in 2020, commodity prices for natural gas skyrocketed due to overwhelming demand across the country. The natural gas prices impacted consumers across the country including Waukee residents. It took some time for the commodity markets to stabilize after the storm however the City has been evaluating methods of mitigating the costs of natural gas to Waukee consumers. The City has received concerns from residents about the competitiveness of gas rates of the Waukee Municipal Gas Utility as compared to rates in other communities served by public utilities such as MidAmerican Energy which serves the greater Des Moines area and a large part of the State of Iowa. The economies of scale between the Waukee Municipal Gas Utility and other public utilities serving a much larger customer base necessarily impact the level of rates associated with the provision of natural gas utilities to consumers. The Waukee Municipal Gas Utility is well run and has managed the growth of the City and the commensurate expanding customer base making the necessary investments in infrastructure to assure that the gas utility is able to serve the community both now and into the future. However, the economies of scale are such that the provision of service by the gas utility serving only one community requires rates that are higher than competing utilities serving a larger customer base. The City of Waukee Iowa, has considered the following alternatives to disposing of the Waukee Municipal Gas Utility by sale, including entering into an agreement pursuant to chapter 28E, or into a finance agreement, purchase agreement, or lease agreement with another entity described in Iowa Code section 476.1, subsection 3, and determines: 1.The City continuing operation, improvement and maintenance of the Waukee Municipal Gas Utility is possible, however it will not avail Waukee residents of the opportunity to benefit from the rates enjoyed by residents of other communities served by a public utility with a much larger customer base. 2.Retaining a third party to operate and maintain the Waukee Municipal Gas Utility. a.The public utilities in the surrounding area were not willing to operate the Waukee Municipal Gas Utility as a separate utility or in some other manner. b.Operation by a third-party nonpublic utility would not provide the ratepayers of the Waukee Municipal Gas Utility rates competitive with those served by public utilities in other communities. c.There are no neighboring municipal gas utilities available to assist in running the Waukee Municipal Gas Utility in a cooperative manner. 3.Other alternatives a.After thoughtful consideration, the City is not aware of any other feasible alternatives to achieving competitive rates compared to those of consumers in neighboring communities except to sell the gas utility to a public utility with a larger customer base to provide natural gas service to residents of the City.