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MED rates not rising in the near future

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MASSENA — Despite a report from its auditor suggesting the Massena Electric Department should increase its rates, MED Superintendent Andrew J. McMahon said a rate increase is not in his plans for the near future.

“Nobody has talked about it yet,” Mr. McMahon said. “There’s a difference between inevitable and imminent.”

Board Chairman James M. Shaw agreed.

“As long as it has been, sooner or later we will have to raise rates, but we haven’t done anything to that effect yet,” Mr. Shaw said. “A lot of things have changed in the past couple of years, like the state retirement rates, state insurance rates and the cost of materials.”

Mr. McMahon said the price MED pays for utility poles has increased 15 percent, transformers have increased 70 percent and the price of copper has doubled from what it was paying in 2006.

MED Treasurer Jeffrey M. Dobbins also noted that the state retirement rates have doubled in the past four years.

According to the audit, performed by William C. Freitag of Bollam, Sheed, Torani & Co., the company’s net income has decreased from $553,000 in 2009 to only $134,000 in 2012. In 2011, MED’s net income was $339,000, $205,000 more than it was this past year, meaning a similar drop would have the utility losing money.

“MED is at a crossroads,” Mr. Freitag said. “The gross profit built into the base rate you charge your customers is starting to erode.”

Mr. Freitag said ideally, the company would see a rate of return of 5 to 6 percent. Last year’s was less than 1 percent.

“Your rates have done very well for you since they were put into place in 1981,” he said. “Operations costs for you, like everyone else, are going up.”

One positive, though, is that MED has nearly $4 million in available cash for operating expenses and another nearly $4 million available in various reserve accounts.

“If you weren’t in as good of financial shape as you are, you would need a rate increase immediately,” Mr. Freitag said. “Because of that, you can delay the inevitable.

Town Councilmen John F. Macaulay and Charles A. Raiti both attended the audit presentation, reporting back to the Town Council that a rate increase was on the horizon.

Mr. Macaulay said MED is “getting close to a point in time where they need to consider a rate increase,” noting it hasn’t had a rate increase in “forever.”

“But they’ve got enough cash that they could get along for a period of time without a rate increase. … Based on the trend, they would be starting to use reserves to cover their operating expenses,” Mr. Macaulay said.

Mr. Raiti commended MED for its efficiency and low cost for its customers.

“It’s the one service people have that they don’t have to worry about from a cost standpoint,” Mr. Raiti said.

According to MED’s audit, Mr. Raiti is right.

In 2008, the average residential customer paid $830.45 for electric service, more than the $823.65 paid on average in 2012.

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