Written by: Joe B Kent

The Memphis City Council should say No to the 12% MLGW rate increase. After multiple rate increases over the years, MLGW is asking for another 12% electrical rate increase. Concerning is the magnitude of the electrical rate increase, after multiple MLGW recent rate increases to include 49% for water, 7.2% for electrical, and 2% for gas.

Also concerning is the lack of scrutiny by the MLGW Board of Commissioners and Memphis City Council, regarding MLGW CEO Doug McGowen’s proposed lavish infrastructure plans and extended term contracts. These plans and contracts include: 1) an excessive $205M economic development infrastructure buildout plan, 2) $228M in 5 yr. tree trimming contracts 3) an $18M outsourced 5 yr. customer service contract and 4) a $16M paving contract. Let’s take a closer look.

$205M – Economic Development Aeroderivative Power Generation
The good news is that the $205M in power generation, for prospective economic development efforts, is likely unneeded to achieve grid modernization and improved reliability promised under the current MLGW Way Forward plan. In fact, MLGW Commissioner Mitch Graves stated at the October 18, MLGW Board meeting, that the power generation investment is not needed now.

And later in the meeting, Graves stated that historically, the MLGW capital budget is never ever ever fully spent and this FY24 capital budget does not reflect reality (MLGW – 10/18/23). While Graves surprisingly voted for the budget, as proposed anyway, Graves statements reflect reality. The $205M in power generation is not needed!

Effectively and sadly, after Memphis-Shelby taxpayers are currently overburdened with approximately $80M in economic development incentives, that have never ever worked, MLGW ratepayers are now being asked to join the party. The party entry fee for ratepayers is $30M+ more annually, for years to come. Including tax incentives, that’s $110M per year, for this corporate socialist party, in Memphis called, “public economic development”.

Take Away: Eliminating unneeded economic development spending results in a $120M FY24 budget cut.

$228M Tree Trimming

Benchmarked against Knoxville Utility Board (KUB), MLGW’s tree trimming budgeted cost, for FY24, is 173% higher at $33K per tree mile trimmed than KUB’s FY24 budgeted costs of $12K per mile. Regarding Nashville Electrical Service (NES) benchmarking, MLGW’s cost is 100% greater with NES paying $16.5K per tree trimmed mile (KUB- NES FOIA).

“According to Corey Hester of Local IBEW 1288, it costs about $10,000 per mile to trim trees in the right of way. A four-man crew can trim about one quarter to a half mile per day. Over the course of a 260-day work year, that is a minimum of 65 miles per year. A crew costs $625K per year.”

Using Hester’s figures, which take us back to reality and in context with NES and KUB budgets, 1,374 tree miles could be cut, in Memphis, for around $13.2M. But the MLGW FY24 tree trimming budget is estimated to be a whopping $45M!

Take Away: Using the Nashville benchmark and greater cost than Hester and KUB, a minimum of $23M should be cut from the FY24 MLGW budget for tree trimming.

Customer Service Outsource (5yr.)

The $18M in customer service outsourcing is unneeded by MLGW. McGowen testified, before the MLGW Board on May 17 th , that customer service wait times had been decreased from 48 minutes to 3.2 minutes. The former signals a dramatic improvement and win for the McGowen team but nullifies the need for an $18M customer service outsourced contract (MLGW-5/17/23).

Take Away: Customer service contract savings represent a $5M budget savings for FY24.

$16M Paving Contract (1yr.)

While the service area of MLGW encompasses the entire County, paving is not a core function of MLGW. Benchmarked against the City of Memphis annual paving budget of $15M and given this established pattern of excessive budgetary items and contracts, this contract is estimated to be $8.5M in excess.

Take Away: Paving savings represent an estimated $8.5M FY24 budget savings.

Conclusion
The findings above are related to just one economic development initiative and three contracts. What if we looked at all MLGW external contracts? We should, through a forensic audit! In the interim, just say no to the 12% rate increase.

An FY24 10% electrical rate decrease and not a 4% increase results, when benchmarking the MLGW budget against competitive reality, that comes from $156M in FY24 budget cuts. In addition, the former competitive reality also eliminates the need for a 12% rate increase altogether. Let’s get back to reality!

Check the Facts
*Note: Via FOIA request, unlike NES and KUB, who shared their FY24 total tree trimming budget, MLGW was unwilling to share their total FY24 tree trimming budget. To derive the MLGW $45M budget, the additive $32M for tree trimming
presented in the MLGW FY24 budget narrative, was divided by 90 crews and then multiplied by 37 existing MLGW crews totaling $13.1M. $13.1M was then added to the $32M additive figure, to derive the MLGW FY24 $45M tree trimming budget. The 37 existing crews MLGW reference can be found in the WMC-TV reference below.

• City of Memphis FY24 Budget (pdf pg. 75) - https://1drv.ms/b/s!AiNXRWm6KZQigpZsvLwdhTTln4tlLQ?e=ubEK8E
• Knoxville Utility Board (KUB) FOIA. October 19, 2023. Tree Trimming Benchmark https://1drv.ms/b/s!AiNXRWm6KZQigpZK-uS2RGfaTxK5JQ?e=iLvG9M
• Nashville Electric Service (NES) FOIA. October 20, 2023. Tree Trimming Benchmark. https://1drv.ms/b/s!AiNXRWm6KZQigpZLjbEu8N5lMg0Mew?e=4aG1OU
• MLGW FY24 Budget Increase Document. October 18, 2023 Board Meeting https://www.mlgw.com/images/content/files/pdf/Board%20Presentation%2020231018%20v1_0_edited.pdf
• MLGW. May 17, 2023, Board Meeting. $18M Customer Service Outsource Contract. 01:11:30 in the MLGW Board Video - http://mlgw.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=2132&Format=Agenda
• MLGW. October 18 Board Meeting. Commissioner Graves quote on power generation 01:33:00 and 01:47:00 http://mlgw.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=2166&Format=Agenda
• WMC-TV5. August 24, 2023. MLGW more than triples tree-trimming arsenal (37 Existing Crews). MLGW more than triples tree-trimming arsenal (actionnews5.com)