Colton’s power plant still lacks expansion
Michael J. Sorba, Staff Writer
Posted: 08/08/2010 07:03:11 AM PDT

COLTON – Electric-rate increases approved by the City Council in 2009 have so far not helped get a promised power-plant expansion off the ground, a recent audit of the Colton Electric Utility found.

In public presentations, former utility General Manager Jeannette Olko said higher rates were partly needed to finance an expansion of the city’s Agua Mansa power plant, the construction of a new substation in the city’s north end and the replacement of aging underground power cables.

In May and November 2009, rates increased by 8.7 percent and 8 percent, respectively.

The substation project, estimated to cost $12.5 million, is under way. The proposed expansion of the plant, estimated to cost about $38 million, is still uncertain.

One councilman says it’s best to sell the power plant because it costs more to produce power there than to buy it on the market, and it only generates a small portion of the utility’s electricity.

“It’s only being used 7 percent of the time,” Councilman David Toro said. “My opinion of it now is, why are we spending so much money on something that’s used 7 percent of the time? We should sell it because it’s not cost-effective.”

The utility carries about $58 million in debt related to bonds the city issued to pay for the plant – built in 2003 and financed by a $42 million revenue bond – the north substation and smaller projects, the audit said.

A July 2008 report that the utility’s staff provided the council and Utilities Commission in a joint meeting states the plant runs 7percent of the time, usually during summer months when demand is greatest. The plant’s operating and maintenance, fuel and debt-service costs total $6.2 million to $7.2 million per year, the audit said. The utility is operating on a $59 million budget this year.

In fiscal year 2008-09, the average cost of plant-produced power was about 11.4 cents per kilowatt- hour, but the city spent only 8 cents per kilowatt-hour on power purchased from other generators, according to the audit.

The operations and management of the plant are run by a contractor that has a budget of $3.3 million per year. In the seven years the city has used the contractor, the audit said, it has never audited the contractor’s expenses and operations.

Each year, the contractor gets a budget of about $1.8 million to buy materials, supplies and services. The city doesn’t have formal procedures for reviewing and approving purchases made with the fund, the audit found.

At a September meeting, the council will be presented with a report articulating which of the audit’s suggestions city staff members agree with and which ones they don’t, City Manager Rod Foster said.

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