GEUS Summer 2003 Consumer Newsletter

This is the 15th Anniversary of the creation of the GEUS Board. It is also my 15th Anniversary of managing GEUS. This newsletter is dedicated to the accomplishments of GEUS during that period of time.

The first ever creation of an autonomous GEUS Board in Texas can be pronounced a success when you look at what has been accomplished. The citizen Board appointed by the City Council was a bold new approach to the governance of a municipal utility. The new Board immediately drafted formal written policies for the General Manager to follow. The General Manager reorganized and set clear cut goals. The employees have performed and transformed GEUS into an award winning Texas utility.

It has been a magnificent honor to serve the City of Greenville. This will be my 40th year serving the public and my 20th year of municipal utility management. Little did I know that 40 years ago when I took my first co-op job as an engineering student with a municipal utility that I would enjoy such a fantastic career? What could be more rewarding than to serve the public with a vital service that has changed the world? Greenville has a proud history of accomplishment since the very beginning. A thorough documentation of our history can be found at www.geus.org

Have you ever heard someone say that Greenville has the highest electric rates in the state of Texas? Well it's not true! Shortly after the formation of the GEUS Board in 1988, GEUS lowered its rates in the following manner to become competitive with the rest of the state.

Gibbons Creek coal fired generating plant

"GEUS rate decreases have brought the overall average cost\kWh down by 20% over the last 15 years", said Tom Darte, GEUS General Manager. Competitive rates have been secured for both the present and future through Greenville's ownership of its own generation facilities. Greenville's 10% share in the Texas Municipal Power Agency's (TMPA) coal-fired Gibbons Creek Generation Plant furnishes the bulk of the city's electrical needs. We are very fortunate to have coal-fired generation which provides some of Texas' most economical electricity. Large coal-fired plants cost more to build, but less to operate. A recent study determined that the Gibbons Creek Plant has a useful life of more than 25 years. That plant will be debt-free in 15 years.

When the electrical needs of Greenville is greater than the TMPA plant can provide, the local gas-fired plant in north Greenville is called on to provide the rest. This natural gas-fired plant can be modified to burn No. 2 Fuel Oil, known as diesel, in emergency cases. This has happened twice in the last two years when natural gas has been curtailed. GEUS also has the option, and often does, buy and sell power on the open Texas market. "This flexibility combined with the majority of our power coming from coal ensures that Greenville will have competitive electric rates for years to come", added Darte.

GEUS is very fortunate to have very manageable indebtedness. The local debt was $22.4 million when the Board was created in 1988 and the system was suffering from electric reliability issues. Over the past 15 years, approximately $26 million has been invested into the local electric infrastructure, which has greatly improved the system's reliability. At the same time, GEUS aggressively paid down the debt to $9.9 million. This is quite remarkable when you consider that GEUS added a state-of-the-art hybrid fiber\coaxial cable TV\high speed Internet operation to the system in 2001.

Contractually, GEUS is responsible for 10% of the Texas Municipal Power Agency's (TMPA) Gibbons Creek Generation Plant. The cities of Garland, Bryan and Denton are responsible for the remainder of the plant. Greenville's current share of the principle of TMPA's debt is $107.4 million which will be completely paid off in 2018. GEUS' annual TMPA debt payment is 23% lower than it was in 1988.

Greenville's mix of coal and gas-fired generation is viewed favorably by the investment community that scrutinizes TMPA and member city's operations. As a matter of fact, GEUS' bond rating was upgraded in 2001 by Moody's to A2 after reviewing its financial stability. Standard & Poor's most recent rating of the utility was an impressive "A with a Stable Outlook". Standard & Poor noted "a manageable capital plan" as one of the factors in issuing this excellent rating. Both of these ratings took into account that GEUS was entering the cable TV and Internet business.

GEUS has the first and only fully-autonomous municipally-owned utility governing board in Texas. The first 97 years of its existence, or before 1988, the electric utility was operated as a department of the City. High electric rates combined with poor system reliability caused citizens to form a committee to pursue other means of governance. Ultimately this group of citizens proposed that an autonomous board be formed and in 1988 the citizens amended the City Charter by a 4-1 vote to allow GEUS to operate separately. In 1989, Representative William N. Thomas of the Texas House of Representatives sponsored a bill authorizing the GEUS Board to set rates, issue bonds and various other charter-defined powers needed by a governing body. GEUS' Board consists of Greenville citizens that serve a non-compensatory three-year term and are eligible for reappointment one time.

Nominations to the GEUS Board are made jointly by the GEUS Chairman and the Mayor of the City of Greenville. After the GEUS Board verifies the nominee's qualifications for service on the Board, the appointment is confirmed by vote of the City Council. Qualifications include:

We proudly list our past and present GEUS Board Members. Many of these individuals are also active throughout our community and several have been honored with the distinguished award of Greenville Worthy Citizen. Their hard work and dedication is shown through GEUS' 15 years of accomplishments.

The 1988 Charter Amendment Election called for GEUS to transfer 4% of its gross adjusted income annually to the City of Greenville as transfer fees of which 1% of the 4% would be forwarded to the Greenville Board of Development. The expected 4% transfer for 2003 is $1,503,816 with $375,954 of that going to the Greenville Board of Development.

Additional money is transferred annually to the City for services performed for GEUS. These are services such as utility billing, customer service, meter reading, payroll, human resources and vehicle maintenance. GEUS contracts services with the City when it is more economical than hiring in-house employees to perform those same duties. This year's transfer is $1.31 million for these services.

GEUS also pays the City an annual PILOT (payment in lieu of taxes) on local GEUS assets such as the generation plant and service center. This year's payment is $345,779.

Over the 15 year period, GEUS has transferred a total of $37.9 to the City of Greenville with $4.7 million of that being forwarded to the Greenville Board of Development.

Operations & Maintenance Costs

GEUS office building

In 1988, there were 64 electric employees, but no engineering department. With new General Manager Tom Darte tasked to improve the electric system's reliability, 5 employees were added to focus on keeping Greenville's lights burning. Through employee attrition, Darte and the GEUS Board downsized some areas of the organization while expanding other areas to improve efficiency, system reliability and customer service. By 1993, GEUS was employing 66 people. A substantial demand for more electricity, mostly retail outlets, over the last 10 years has required the utility to increase the number to 76 electric-only employees. In the past 15 years, additional positions have been added in the area of engineering, accounting, purchasing, accounts payable, substation management, tree trimming, dispatch, geographical information system, warehousing, customer service, building\grounds maintenance and clerical.

The question must be asked. What affect has a 55% increase in electric usage over the last 15 years and 12 additional employees had on GEUS' on-going cost to operate and maintain the system? The non-fuel portion of the Operations and Maintenance Budget is 4% less than it was in 1988. This is a fact in which we are quite proud! Many operating efficiencies have been achieved to assist in this reduction. Such operating achievements as sale of power to other cities, lowered cost and share of TMPA fixed costs and renegotiation of natural gas contracts/pooling arrangements.

The fuel portion of the Operations and Maintenance Budget has not gone down. As a matter of fact, dramatic natural gas price increases over the last couple of years has increased GEUS', and many other utilities, cost to produce power. Utilities pass this cost to produce power along to the consumer through the Fuel Adjustment Charge (FAC). GEUS' coal-fired source of generation has lessened, but not eliminated, the impact of natural gas increases. GEUS has remained competitive with other utilities during this time. In the late 90's, the GEUS FAC was very stable and averaged around 1.8 cents\kWh Nationwide natural gas increases has raised GEUS' FAC to 3.35 cents\kWh for this month's billings. TXU's current residential FAC of 3.9265 cents\kWh is 17.2 % higher than GEUS' FAC.

GEUS' entry into the cable TV and high speed Internet markets has been well documented. Focus groups of Greenville citizens showed a growing frustration over continuous annual increases in cable TV rates and the lack of commitment from existing companies to bring high speed Internet to Greenville as was happening in other Texas cities. The Greenville Board of Development was beginning to report that lack of high speed Internet was hindering their ability to bring new businesses to this area and even feared that we might begin loosing existing businesses to neighboring community's technology parks. GEUS announced on January 19, 2001 that it would pursue the addition of cable TV and Internet services if the citizens wanted it. Strong support came from the community in May of 2000 with passage of an amendment to give GEUS the authority to enter these new markets. December of 2000 brought the announcement that GEUS had entered an $8.2 million construction contract to build a hybrid fiber\coaxial network throughout the city. Greenville became the first municipal in Texas to offer these high-tech services with GEUS' first connection coming in June of 2001 and the on time completion of the project a year later in May of 2002. "The cable TV and Internet business is proceeding well according to plan and is exceeding expectations", said David McCalla, GEUS Assistant General Manager for Electric, Cable TV and Internet Operations and Engineering.

Greenville's Community-Owned
Electric, Cable TV & High Speed Internet Provider

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6000 Joe Ramsey Blvd.
Greenville, Texas 75402
(903) 457-2800
Fax (903) 457-2893
information@geus.org

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CONSUMER UPDATE

April 2003 Consumer Newsletter