Breaking: City will not renew Light Lease with I&M

Press release from the City:

Mayor champions fairness, seeks best value for electric utility
City seizes opportunity to leverage key asset, ensure competitive rates & return

Mayor Tom Henry today announced that the City of Fort Wayne has elected to exercise its option to take its municipal electric utility to the market through a competitive bidding process that will allow the selection of a new operator.

The City’s current lease with Indiana Michigan Power (I&M) will end on March 1, 2010.  According to lease provisions, notice of the City’s intention to act had to be given by May 31, 2009, when it became apparent that a new agreement with I&M would not be reached.

“It’s a matter of fairness,” said Mayor Tom Henry.  “The current electric-utility lease represents 33,000 valuable customers.  They are a significant asset, and the City of Fort Wayne should be compensated fairly for the right to serve them.  As the steward of this asset and CEO of Fort Wayne, it is my duty to secure the best possible for our electric-utility operator.  In these difficult economic times, our citizens need someone who will fight for them.  Fair is fair.  We had hoped to be able to continue to work with I&M, but if we must see a new partner, we will.”

“This is the best path for the ratepayers of Fort Wayne,” said Indiana State Representative Win Moses, chair of the Indiana House Commerce, Energy, Technology and Utilities Committee.  “We will have the most competitive rates by doing this.”

The City leased, but did not sell the municipally owned electric utility, known historically as City Light and Power, to I&M on September 13, 1974.  The lease that has been in effect for over three decades gave I&M access to the utility’s assets and the exclusive right to provide those customers with electric power.  The lease is now coming to its natural conclusion.

While the relationship with I&M has been a positive one, no agreement on a fair value for City customers and the privilege of serving them going forward was attained.  The City now intends to test the fair-market value of future electric-utility payments through an open, competitive process.

“The American marketplace is built on competition,” noted Henry.  “Much has changed in 35 years.  By openly bidding the electric system’s operation, we will ensure high-quality service and an equitable, long-term return on our investment.  This is a financial decision that’s in the best interest of ratepayers and taxpayers.  It is also a very thorough and considered decision.  I&M has been a good partner, but I cannot allow the citizens of Fort Wayne to have a major asset undervalued.  The right to serve our citizens and collect fees has real value.  It is my job to make sure that value is fair.  The competitive process will help us achieve that end.”

The City’s next step will be to obtain competitive bids for system operators.  A Request for Information will be prepared and circulated to determine the interest of other power companies and service providers.

“Private-public sector partnerships are a proven model for encouraging sustainable community growth and leveraging our essential resources effectively,” added Henry.  “Rest assured, paramount in our decision making will be the imperatives of competitive rates, reliability and high-quality service.  We will not compromise on those criteria.  Publicly owned and privately managed utilities are common in Indiana.  We look forward to joining this established statewide group of independent providers in supplying excellent services to Fort Wayne residents.

Over the period of negotiations, City teams have been exploring the operation of other Indiana-based, municipally owned electric utilities.  Plants in Auburn, Mishawaka, Crawfordsville and Anderson have been investigated with comparable, cost-effective levels of service found.

“We will work with I&M to guarantee a smooth and orderly transition,” added Henry. “My primary motivation, and I know it is I&M’s as well, is to maintain delivery of the highest quality electric service to Fort Wayne customers at all times.  We are grateful for the good service and constructive relationship we have enjoyed with I&M over these many years.”

The service area for the Fort Wayne municipal electric company covers the core areas of Fort Wayne.

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  1. This is a terrible idea. I&M as the second lowest rates in the state. I hope I&M calls your bluff Tom. This city couldn’t afford to pay the $85 million it would owe I&M for all the improvements that have been made. Thanks for all the community support and the tremendous work during the ice storm.. Thanks, but no thanks. Nice political move Tom. This will ensure you will be replaced.

  2. I&M will be allowed to bid also, so isn’t competition good for everyone? And why didn’t I&M find out what “fair value” is for it’s customers?

  3. For 33,000 customers, who’s gonna fork over that kind of money? I&M will still have what, close to 240,000 customers here in Ft. Wayne? Plus, AEP will still most likely be the provider for what ever company takes over. I don’t see the City generating their own power from the Science Central building. So where is it going to come from?
    The City says I&M didn’t place a fair value on city-owned assets? Mark, 95% of those assets (52 out of 54 circuits) have been retired in accordance with the lease and NO LONGER exist. Another problem that the public doesn’t seem to realize, state laws that were adopted in 1980 (after the lease) reinforce I&M has the right to continue serving customers inside the footprint of the old City Light and Power Company. I&M probably doesn’t intend to abdicate those rights. I guess the close to $4 million the City receives in payments and property tax money hasn’t been very important to the financial health of the City.
    I&M provides us with low cost, great service, and great corporate citzenship. All of this fails to mention the great work I&M does with storm efforts. You think those 33,000 customers will have the same resources I&M can provides during a major storm? I&M can bring in thousands of lineman from all over the U.S. to provide assistance. Could the city do the same?

    • During the press conference, I believe Ben Lanka of the Journal Gazette asked specifically if it were about power generation – the answer was no.

      I’m not trying to argue, but 33,000 customers – remember a good percentage of these would be businesses or in some cases even manufacturing concerns – for instance like GE which I believe is included in this grid.

      I agree that no one is going to come in and pay $85M, however, what’s not clear, or if it is I haven’t read it, is how firm that $85M is. Does it include depreciation?

      I personally think it would be good to open it up. If I&M is truly the best deal for consumers, this will be born out by the results of opening it up for bidding.

      Hopefully, though, the City hasn’t opened up a can of worms. Thanks for your comments!

  4. WOW Justin! Great facts! Who can explain the difference between Auburn and Columbia City?! While these 2 towns are really similar there is a huge difference in rates…… What is Auburns secret?


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