TUPELO – Northeast Mississippi’s 10 electric power associations hold $17.4 million in investments and $14.8 million in cash, their latest financial reports show.
While the way they approach using those funds differs, officials say they must plan for emergencies and use cash to pay their power bills.
“Our biggest potential for loss is the weather,” said Ronny Rowland, general manager for 13,731-member Prentiss County Electric Power Association based in Booneville. “That could put our customers in a problem, if we didn’t keep reserves.”
As an example, he recalled the infamous ice storm of 1994. That natural disaster cost the utility about $1 million in losses.
Questions about EPA investments came up recently with the revelation that McComb-based Magnolia Electric Power Association sank some $5.3 million during 2008 into Stanford Financial Group, which collapsed earlier this year under the weight of a U.S. Securities amp& Exchange Commission investigation.
Magnolia officials say they have recouped about $3 million, with hopes for the other money, which is under control of a court-appointed receiver.
A Daily Journal survey of the state’s 25 EPAs showed no other Stanford investments.
But the Magnolia experience raised questions about how other EPAs are handling investments and cash for their member-owned organizations.
Brandon Presley of Nettleton, Northern District Public Service commissioner, is asking his own questions, especially about the safety of the EPAs’ investments over traditional bank products.
“I don’t think state law contemplated investments” outside of bank and trust companies, Presley said late last week.
He says he plans to ask for PSC authority to require EPAs to undergo compliance audits every year to review whether they’ve adhered to regulatory guidelines.
A look at the region’s EPAs shows a nearly $500 million industry serving more than 227,000 people.
Mississippi has 25 EPAs, which are private, member-owned corporations created by an act of Congress to provide electric power to their jurisdictions. They are governed by local boards of directors elected annually by the membership of the rural utility’s customers.
Northeast Mississippi EPAs are on two reporting cycles, depending on if they buy power from Tennessee Valley Authority or not. TVA buyers make annual financial reports through June 30, while the others are on a calendar year.
Tombigbee and 4-County are the region’s largest power associations.
Tombigbee, headquartered in Tupelo, reported $104.9 million in operating revenue with 41,055 customers through June 30.
4-County, which actually serves parts of eight counties based from Columbus, reported more customers – 55,812 – but slightly less revenue at $101 million through December 2008.
Eddie Howard at Alcorn EPA and Barry Rowland at Monroe EPA have similar views about why their organizations need easy access to money, whether it’s cash in the bank or in temporary investments.
“This is our working money,” Howard said, noting Alcorn’s cash goes toward paying TVA for power, which can range from $3 million to $5 million a month.
Barry Rowland says Monroe’s funds are a “cushion” against unexpected costs or problems. They’ve also been planning for a new building to replace their current circa 1954 headquarters.
Avoiding rate boosts
Most EPA managers interviewed agreed they also keep cushions to keep from having to go back to customers, with rate increases, to fund projects like that.
“People will be griping if we have to come back for more,” Rowland speculated.
Sam Buchanan at Tippah EPA said TVA-affiliated companies are required to keep in reserve at least one month’s power bill, which can run into the millions.
Of the region’s EPAs, Alcorn’s June financial report shows it had the most cash on hand with $6 million. Tombigbee’s was the lowest at $137,610.
At Pontotoc EPA, manager Chuck Howell says he and the board play it very conservatively, probably leaning more to short-term borrowing to solve a financial pinch than to raising rates.
“It’s been a tough year for cash flow,” he said, noting even with a down economy and mild weather, the utility must maintain rights of way and re-invest in the system.
For investments, Monroe’s was the largest at $5.7 million compared to the lowest, Tishomingo EPA with $77,867.
Presley has been critical recently of Mississippi EPAs, especially of what he’s termed the secretive ways they operate.
Last week, when Magnolia’s Stanford investments came to light, Presley said more accountability and transparency should be required EPA boards of directors.
“State law says any extra money is to be refunded to customers,” he said. “No one would argue against having some reserve funds, but this is where the PSC needs to step in.”
Contact Patsy R. Brumfield at (662) 678-1596 or firstname.lastname@example.org.
Patsy R. Brumfield/NEMS Daily Journal