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Hot Water in Memphis

MLGW’s latest rate hike is another indication of the utility’s tone-deaf management style.

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It was one of those drop-the-microphone, Elvis-has-left-the-building moments that Memphis City Council meetings can sometimes produce: A frustrated councilwoman, Wanda Halbert, verbally blasted stoic Memphis Light Gas & Water President Jerry Collins with an observation that sounded familiar. During a discussion about the city-owned, nonprofit power company's fees, Halbert said, "Memphis Light Gas & Water belongs to the city of Memphis. It doesn't belong to Memphis Light Gas & Water. It feels like it does not belong to the City of Memphis. It's almost like, somehow, you all have evolved into an island of your own!" She then exited the room without waiting for a response. No rebuttal was needed and none came.

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Almost the exact description of MLGW's operational procedures was uttered by our former "forever king," Memphis Mayor Willie Herenton more than a decade ago. In 2003, Herenton roared, "MLGW is an island unto itself," in accusing the utility of being wasteful and inaccessible to the needs of customers. Six years earlier, Herenton had tried mightily to convince council members to sell off what is universally acknowledged as the city's most profitable asset.

Former Flyer columnist John Branston chronicled the story in great detail. Herenton hired a Philadelphia consultant named Rotan Lee, who, for the nice round figure of $150,000, produced a study of the utility's effectiveness — making a case for privatizing all or parts of the utility, estimated at the time to be worth $800 to $850 million. Lee tried to make the case that community-owned utility companies could no longer be "natural monopolies" in a world where federal deregulation of utilities was becoming the norm. Lee concluded that such utility companies would, in the end, "lose the crucible of good will with their customer base." In hindsight, Lee's prediction would appear to rival those of Nostradamus.

Distrust of the utility's intentions only heightened, when, just after receiving the tongue-lashing from Halbert and other skeptical members of the council, MLGW officials announced they would propose a 2 percent hike in residential water rates to make up for revenue projected to be lost when the Cargill company closes its corn-milling plant on Presidents Island in January 2015. MLGW officials said that Cargill accounted for 5 percent

of the water sold by the utility, leaving a $4 million revenue shortfall to make up. There had been no mention of the rate hike in the council meeting just two days earlier.

To add insult to injury, Cargill is walking away — without any financial penalty — on the four years that remain on a PILOT property tax freeze agreement issued by the city and county in 2010.

What should be even more worrying for MLGW customers is the fact that Roland McElrath is the man behind the plan for the utility's proposed rate hike. McElrath became the utility company's controller in 2012 after resigning his post, for the second time, as the city of Memphis finance director. This is the same career numbers-cruncher who, in 2011, assured city council members Memphis could afford to give its city employees Christmas bonuses because of a surplus created by cost-saving measures enacted during the prior fiscal year.

After the council passed a $6.2 million Santa offering, a sheepish McElrath recalculated. Oops. There was actually a $6 million deficit — a shortfall that later ballooned to $17 million — that required the council to dip into dwindling city reserves to cover the overall deficit. This should give all of us, particularly those struggling to pay their bills each month, plenty of reason for pause when it comes to MLGW's plan to offset lost Cargill revenue.

When most companies lose a valued client, they don't take it out on the good customers that remain with them. They buckle down and try harder to keep them happy. As MLGW customers, we appreciate the employees' hard work and dedication whenever power outages hit the city. We appreciate their charity work. We appreciate their moratoriums on bill payments in extreme weather conditions. However, it's their perceived arrogance and take-it-or-leave-it autonomy that spawns tirades like Halbert's. Taxpayers pay the hefty salaries of the utility's management. Aren't we owed an open accounting of their billing procedures, rather than being suddenly blindsided with a rate hike?

Don't we all live on the same island?

Les Smith is a reporter for WHBQ Fox-13 News.

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