NOVI Energy status report for the I&M Light Lease

The Board of Public Works met and heard a presentation by Anand Gangadharan with NOVI Energy this morning.

NOVI Energy was awarded a contract by the Board of Public Works in July to provide the following:

  • Review and catalogue documents from the past 35 years of the lease
  • Inspect and assess the value of the original City Light infrastructure (equipment)
  • Inspect and assess the value of I&M infrastructure changes (equipment)
  • Analyze technical data
  • Develop a transition plan for the City to resume management of City Light electric distribution, including engineering guidance
  • Develop a project schedule
  • Gather information to prepare an RFP (Request For Proposal)

The text of Mr. Gangadharan’s presentation:

Good morning, my name is Anand Gangadharan; and I am the President and CEO of NOVI Energy (NOVI), an energy consulting and development firm located in Novi, MI. NOVI Energy has been hired by the City of Ft Wayne (City) to assist in the planning required for the City to re-assume the direct management of the City’s electric distribution franchise at the completion of the asset lease to Indiana & Michigan Electric Co (I&M).

My purpose today is to give the Board of Public Works a brief report on NOVI’s qualifications, the status of the work to date and a few observations we have made as the work has proceeded. Of course, I would be happy to answer any questions you may have at the end of my brief remarks.

First let me start by summarizing the qualifications of the NOVI team. All but the youngest member of the team have many years, in fact decades, of directly relevant utility technical and management experience. Four of us have one or more degrees in electrical engineering. More importantly, our lead planner is a recently retired utility executive who spent the last 14 years of his career directly responsible for the planning and operations of the distribution system of a major utility, and for the first 25 years of his career he held progressively responsible positions in the utility’s district and regional distribution operations. A second member of our team is a substation specialist who has many years of utility experience and is currently an independent contractor leading a substation maintenance team that provides these services to a large transmission system operator. Another senior member of our team has over 40 years in the energy business, over 30 years in the utility business with over 20 years as an officer or sr. officer. As a utility officer he was responsible, for several years, for the strategic planning for a major utility, and during a large portion of his career he was involved in many significant transactions with the associated contract negotiations and in a few cases, litigation, to resolve the issues that the parties couldn’t or wouldn’t resolve without recourse to the courts. I am a Nuclear Engineer and Physicist by education, have worked in both the regulated and unregulated sides of utility companies, holding staff, line management and executive positions.

Let me now turn my remarks to the progress NOVI has made on its assignment which is primarily to plan and implement the work necessary for the reinstitution of the City Light electric distribution franchise. Our work started by getting the team fully briefed on the history of the City’s lease with I&M and the current interactions between the two parties as the lease approaches the end of its original term. We have now reviewed and catalogued the entire box of documents we received from the City, consisting primarily of I&M’s annual reports to the City and other lease related documents.

Our first formal task was to make a visual inspection of the existing electric infrastructure generally within the 1974 footprint of the City Light system. An interim report has been provided to the City. This inspection is much less thorough than is ultimately required. It is currently limited by lack of access to the actual sites and a lack of detailed technical data which although requested, and is a requirement of I&M in their contract, has not yet been obtained from I&M.

The City has submitted questions to I&M. There is also a suggestion in front of I&M to establish a technical working group to facilitate these end of lease activities. Their response is awaited.

Our team has now prepared a detailed outline of a transition plan which defines the full scope of activities required for the City to resume the management of the City Light electric distribution franchise. Development of a project schedule and review of this transition plan outline with the City is just starting. While the outline is extensive, the plan cannot be completed without considerably more detail and cooperation from I&M.

One task within the transition plan is to prepare an RFP for a contract operator to carry out certain tasks the City does not wish to assume in managing the new City Light. Initial drafts of this document have been prepared, and the issuance date for the RFP and a qualified bidders list are under discussion. The City has asked us to include I&M in the list of prospective contract operators.

This concludes the status report on NOVI’s work. Now let me add to this report with several observations that seem appropriate at this juncture.

First, from my status report it is obvious that cooperation from I&M has been minimal up to this point despite public comments to the contrary. If there is to be a transition from I&M back to the City, then both parties, but most critically the outgoing operator, must assure that a viable, complete operating system is turned over in an orderly process. The new operator cannot be kept in the dark until the turnover. The citizens of Ft Wayne deserve that assurance.

Secondly, I am puzzled at the relationship between I&M and the City. From my experience in the utility industry and as a utility customer, it was always in the utility’s best interest to have good relations with it’s local government entities and major customers even when there might be ongoing or unresolved commercial issues. While I don’t know local history very well, it seems odd to have I&M reps making derogatory statements about the City, particularly when they are trying to acquire something of value from the City.

The City runs complex utility systems very well. I&M is a large, competent utility and rightfully proud of their capability. However, they are not the only ones who can operate a distribution system. Just look at the numerous municipals, co-ops and REA’s in Indiana and around the country.

Finally, what seems to be going on here is a commercial disagreement over who will buy what from whom and what will be a fair price for the asset(s) being sold. Either I&M will purchase the City Light franchise from the City or the City will purchase some amount of I&M infrastructure that was built during the term of the lease. This sounds simple, but it isn’t.

As I listen and read, the threshold issue is that I&M is refusing to acknowledge that the City still owns the electric distribution franchise. It claims that the 1980 State law and subsequent 1984 IURC order gives them the franchise. However, I&M then refuses to use the compensation formula within the order to pay for the value of the customers lost by the City. This is a wonderful “heads we (I&M) win; tails you (City) lose” proposition. It is also a sure path to litigation! What other course does the City have when it is being pressured to give away one of its most valuable assets.

That concludes my remarks, and I would be happy to answer your questions.

Related Website:
NOVI Energy

6 COMMENTS

  1. I guess i don’t understand this mess. I haven’t heard anything in the press from I&M bashing the City. It’s been all the City, and now this NOVI Energy company. There is such an attitude toward I&M all of a sudden, staging these press conferences, instead of trying to work this out. After over 34 years of service, now all of a sudden I&M is in breach of the agreement? Correct me if i’m wrong, but the City didn’t provide 12 months notice to the expiration of the lease, as it’s stated in the agreement. The City asked for an extension and it was granted by I&M. Of course this NOVI company is going to say what the city wants it to, for $95,000 wouldn’t you? What about the other 4 consulting firms that were hired by the City? Also, this claim that nobody from I&M will meet with NOVI I say is false. The the New-Sentinel, Susanne Moorman Rowe said, said the utility would allow such inspections, but I&M insists on escorting people around energized equipment. Which is understandable, considering the liability here. “We said, ‘Just call us and schedule.’ They never called to schedule,” she said.

    I guess in my work experience, I have absolutely no reason to trust anyone from the City.

    • Justin – yes, I did get to meet with I&M. It was a very informative meeting and I must say they are taking the high road on this issue. I think you’ll be hearing from them soon. If you didn’t read it, there’s a post about Tuesday’s City Council meeting during which Council President Tom Smith announced the administration will be speaking at an upcoming meeting and that he has intentions of asking I&M. I can tell you that he did contact I&M and my feeling is they will be making an appearance at a meeting as well – probably not the same meeting.

      I am working on some things for this and will be posting different items over the next couple of weeks. There is more to this than the City’s side.

  2. I’m pretty sure there was supposed to be a City Council meeting, one that included changing this set price.. I think i read that on here, I’d have to dig back and check.

  3. The “Professional Services Ordinance” or “Lobbyists Ordinance” as it had been erroneously dubbed by WANE-15 and the rest of the media, had been placed on indefinite hold as the Administration was wanting to “tweak” it – not tweet it on twitter, ha! The last I’d heard was in an e-mail from Liz Brown after my inquiry. In it, she shared that she’d agreed to hold the ordinance again for the Administration. This was on August 6, 2009. If I think of it and have time, I’ll ask Liz about it Tuesday evening.

    The reason I said erroneously, is that this is much bigger than lobbyists. It covered consultant contracts as well. WANE-15 and the others I think misread the motivation behind the ordinance, thinking it was triggered by the “revelation” of the second lobbyists hiring in February for the casino issue. There had been verbal discontent with the process voiced by various Council members long before that revelation.

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