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20% solution

October 23, 2013
Morning Journal News

Editor:

At the Oct. 15 meeting of Columbiana City Council, Councilman Blakeman claimed that he found three Ohio municipal utilities that " had total electric rates that were nearly 20 percent less than ours."

On his campaign Facebook page, he states, "The salaries of the City Manager and other employees that do not run the electric dept. are compensated out of the electric dept. which cause your utility rates to be higher than necessary."

In reality, the portion of these salaries and benefits charged to the electric fund adds only 0.16 of a cent per kilowatt-hour. This amounts to 80 cents for my usage of about 500 kilowatts/month.

The salaries and benefits of the city manager and other employees that are charged to the electric fund, as identified by Blakeman, amount to around $110,600 per year. The total annual expenses for the electric department are about $8 million per year that includes the cost of power, maintaining Columbiana's distribution system and a state mandated excise tax.

Thus, these salaries and benefits are less than 1.4 percent of the annual electric department expenses and nowhere near the 20 percent difference Blakeman claims that he found for the other three Ohio municipal utilities. Furthermore, these employees often work directly for the electric department and provide administrative services to the department.

Most, if not all, companies allocate these types of administrative costs back to their divisions and product lines through an administrative overhead rate. In the city's case, charging a portion of these salaries is reasonable and an appropriate method of allocating the city's administrative costs back to its departments.

But the bottom line is that moving the portion of salaries and benefits of the city manager and other employees from the electric fund to the general fund will not save residents 20 percent on their electric bills.

Richard McBane

City councilman

Columbiana

 
 

 

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