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HomeMy WebLinkAbout1984-04-11 Council Minutes - Special MeetingEm KENAI CITY COUNCIL, SPECIAL MEETING, MINUTES APRIL 11. 1984, 7:00 PM SENIOR CITIZENS CENTER MAYOR TOM WAGONER PRESIDING A. ROLL CALL Presents Bailie, Hall, Measles, Monfor, Wise, Wagoner, Ackerly Absents None B. PROPOSED SALE OF KUSCO MOTIONS Councilwoman Bailie moved, seconded by Councilwoman Monfor, to approve the transfer of the exclusive franchise dated July 7, 1967, between the City of Kenai and Kenai Utility Service Company from Kenai Utility Service Company to Enstar Corporation, and 1. Waive the City of Kenai's right to acquire the plant and system pursuant to Section 13 of the aforementioned franchise agreement, and 2. Waive the City of Kenai's rights to acquire the plant and system upon the expiration or termination of the aforementioned franchise, and 3. Approve the proposed transaction between Enstar Corporation and Kenai Utility Service Corporation in all respects. There was no public comment. VOTE (Failed)s Yess None Nos Bailie, Hall, Measles, Monfor, Wise, Wagoner, Ackerly PUBLIC COMMENT: Roger Meeks Carmen Gintoli Oscar Thomas, KUSCO Vice President Ray Benish, Arthur Young 6 Co. ARM, 11, 1984 Page 2 MOT.ONs Councilwoman Bailie moved, seconded by Councilwoman Monfor, that the City does not express approval or disapproval of Enstar purchase but retains its franchise right to acquire the system in 1987 and becomes an intervener in 4PUC certification process. PUBLIC COMMENTS Dick Barnes, Enstar Corp. Rick Baldwin, KUSCO Attorney MOTION, Amendments Councilman Wise moved, seconded by Councilman Measles, that City consents to Enstar purchase of KUSCO but retains the franchise rights to purchase in 1987 and become intervener in APUC certification process. VOTE, Amendment (Passed): Yost Bailie, Hall, Measles, Monfor, Wise, Ackerly Not Wagoner PUBLIC COMMENTS Jim White, Par North Oil do Gas Dick Barnes, Enstar Corp. Oscar Thomas, KUSCO Vice President Ray Benish, Arthur Young & Co. Rick Baldwin, KUSCO Attorney VOTE, Main Motion as Amended (Passed): Yost Bailie, Hall, Measles, Monfor, Wise, Ackerly Nos Wagoner ADJOURNMENTS Meeting adjourned at 10 s 00 PM. Janet Whelan City Clerk NOTEs More complete minutes will be available at April 18, 1984 meeting. APMOVW at COUW4 P-%T£ CITY OF KENAI _ 0d eapdai 4 44aha 210FDAU0 1(MM,ALA.tA Mit --- - ' TELEPHONE 20.7533 NOTICE OF SPECIAL MEETING And Work Sessions There will be a Special Meeting of the Kenai City Council and interested persons at 7:00 PM on Wednesday, April 11, 1984 at the Senior Citizens Center at Senior Court. To be discussed: Proposed Sale of KUSCO * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Preceding the Special Meeting on April 11, 1984, there will be a Wor< Session at the same location from 6:00 PM to 7:00 PM. To be discussed: Airport Terminal Applications This will replace the Work Session on Airport Terminal Applications originally scheduled for this date at the Airport Building. s * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * The meeting of the Community Center Committee, originally scheduled for April 11, 1984 has been pnstponed to April 12, 1984 at 7s00 PM in the City Council Chambers. � Janet Whelan, ✓ City Clerk OATEOs April 6, 1984 nwrA ps KENAI CITY COUNCIL, SPECIAL MEETING, MINUTES APRIL 11, 1984, 7:00 1114 SENIOR CITIZEN CENTER MAYOR TOM WAGONER PRESIDING A. ROLL CALL Presents Bailie, Hall, Measles, Monfor, Wise, Wagoner, Ackerly Absents None B. PROPOSED SALE OF KUSCO MOTION: Councilwoman Bailie moved, seconded by Councilwoman Monfor, to approve the transfer of the exclusive franchise dated July 7, 1967, between the City of Kenai and Kenai Utility Service Company from Kenai Utility Service Company to Enstar Corpos at ion, and 1. Waive the City of Kenai's right to acquire the plant and system pursuant to Section 13 of the aforementioned franchise agreement, and 2. Waive the City of Kenai's rights to acquire the plant and system upon the expiration or termination of the aforementioned franchise, and 3. Approve the proposed transaction between Enstar Corporation and Kenai Utility Service Corporation in all respects. There was no public comment. VOTE (failed) s Yes: None Nos Bailie, Hall, Measles, Monfor, Wise, Wagoner, Ackerly PUBLIC COMMENT% 1. Roger Meeks, Box 424, Kenai. He wanted Council to maintain the option to purchase when the franchise runs out in 1987. 2. Carmen Gintoli, 117 Deepwood Ct., Kenai. He wanted the City to purchase the system. We could do this with municipal bonding, perhaps cheaper than business could. 3. Oscar Thomas, Vice President, KUSCO. It has come to the point where repair work will be needed on the meters, the City should consider the escalating cost of gas, and there is an amount of unaccounted-for gas that goes through the system. These will be costs. There is sizable amount of land being added to City with Section 36, this area will need gas. Not all revenue will stay in the area; material purchases, debt service, insurance premiums, consulting fees could not stay in Kenai. The KUSCO building is valued at $250,000, fair market value. His equity is $50,000. There will not be a windfall. Councilman Wise asked, if Enstar would buy, or KUSCO retain, what is the commitment to growth? tor. Thomas replied, it would be the owner's intent to live up to the responsibilities to the extent they could. But in the last year, expenses were in excess of profit. KUSCO cannot borrow further, under the present financing agreement. 4. Ray Benish, Arthur Young h Co. Economy of scale and distribution would benefit Enstar. If the City cannot negotiate competitive price un a lung term contract, they will not benefit by buying in 1987. It would take more work by City stai'f to review KUSCO to see where the City could save if they purchased. l; CITY OF KENAI APRIL 11, 1984 page 2 MOTIONS Councilwoman Bailie moved, seconded by Councilwoman Morifor, that the City does not express approval or disapproval of Enstar purchase but retains its franchise right to acquire the system in 1987 and becomes an intervener in APUC certification process. PUBLIC COMMENT: 1. Dick Barnes, Enster. He thought the City had to consent to transfer of franchise. 2. Rick Baldwin, Atty. for Enstar. He reviewed Section 13, the company must have permission from the City, which consent shall not be unreasonably withheld. Atty. Rogers said there is no time limit on giving consent. The Council motion is neutral. Atty. Baldwin noted APUC was not in existence: at the time the franchise was written. 3. Dick Barnes, Enstar. Enstar feels confident they can meet the test to serve low cost gas to the City. They are not afraid of 1987. They do not object to the City holding till 1987, if their true intent is to do that and spend the next 3 years reviewing. Mayor Wagoner said the 60 day window is not enough time. Councilwoman Bailie said she is concerned with increased costs of Enstar expansion. Mr. Barnes replied, they are connected to the Beluga field system, there are 5 other fields there. All were developed by Pacific LNG. Their project is on hold, that gas may become available to Enstar or others at perhaps a lower price than Shell and others at Beluga. Enstar paid a higher price at Beluga because there are not a lot of proven fields in the area. Most of the gas discovered in the area is committed. It would be bad for the City to hook up to a one or two well system. The pipeline was $55 Million, not $80 Million. It was finished a year early, under budget. They could not justify a line to Wasills and Palmer, they built a pipeline from Beluga to Anchorage past these communities. EnsLar will recommend they pay the same rates as everyplace else. As for new customers, they will have 3,000-5,000, the pipeline will supply more than that. Over 1/2 of the gas they sell will go to power customers. Commercial customers buy over 1/2 of the gas in this area. The majority of the pipeline is complete. In 1986 Enstar price goes from 640 to 270 purchase price of gas, through 1992. Councilman Ackerly asked if the change of meters would be costly. Mr. Barnes replied they have computer track on the meters and their own people to do repair. He added, 2% of the gas is unaccounted- for gas. City Manager Brighton asked, if Enstar takes over KUSCO, could the gas users anticipate increases now and at the end of the contract, and how much? Mr. Barnes replied, probably yes. But the rates would probably go up with the system as it is now. He noted 1983 Enstar costs were lower than KUSCO. Councilman Ackerly asked if Enstar would still be interested in 1987. Mr. Barnes replied yes. Enstar's present plan is not to ask for new rates till the next general rate review. Atty. Rogers asked if Enstar's position was, in 1987 the City did not have an option that that portion of the contract was abrogated by the existence of APUC. Mr. Barnes replier', that, is a legal question that might have to be reviewed by the Atty. General's office. Councilman Wise asked about relocation costs. Mr. Barnes replied, generally they go with the norms of the City where they operate. rig n CITY OF KENAI APRIL 11, 41984 Page 3 4. Rick Baldwin, KUSCO Atty. He thought this was a neutral motion. Atty_ Put4ers replied, it is, it does not give consent. ':t would be timely after a staff report of APUC to raske a decision. Atty. Baldwin said the dilemma of Enstar is the cnsnpany has no right to sell without consent of City," which consent shall not be unreasonable." He would hate to see them gat into an adversary position, with the City becoming the adversary of Enstar for APUC. Atty. Rogers said there is no time limit on period of consent. The City previously asked for extension of time. That was denied by KUSCO. We want to keep the option open. Councilman Wise suggested we have a problem with KUSCO. With the transfer of property, per se, we may be faced with a lawsuit by KUSCO. Atty. Rogers replied, we may. But the appropriate forum is APUC. City Manager Brighton said Administration has reviewed this. Should Council decide to buy, Administration could operate. There are only 2 reasons Council ought to consider buyings (a) If KUSCO walked away, the City has the obligation to pick up. (b) If the City could provide cheaper than anyone else, there is justification. Administration has not had enough time to explore costs to operate and have not checked with suppliers for cheaper price. He is reluctant to advise Council to get into anything private enterprise is standing by to do. MOTION, Amendments Councilman Wise moved, seconded by Councilman Measles, that City consents to Enstar purchase of KUSCO but retains the franchise rights to purchase in 1987 and become intervener in APUC certification process. Mr. Barnes, at request of Atty. Rogers, said he could submit a letter of understanding regarding intent of the motion VOTE, Amendment (Passed): Yess Bailie, Hall, Measles, Monfor, Wise, Ackerly Not Wagoner PUBLIC COMMENTS 1. Jim White, For North Oil A Gas. He asked, how binding is a letter of understanding? When Enstar acquires the facility, if the City could purchase, what is to keep them from charging $5 Million? They could price the City right out of it. When Enstar acquires this, they will have a lock on the gag supply in Southcentral Alaska. The City has offered their constituents no safeguards. 2. Dick Barnes, Enstar. Regarding the price of gas, Enstar has been lower than KUSCO since 1968. Enstar is based on rules of APUC. 3. Oscar Thomas, KUSCO. KUSCO has honored the terms of the agreement, they have gone to great expense on relocations. They would like to see the City respond in kind. 4. Ray Banish, Arthur Young. The 60 ctay period is not sufficient time for review.The price of gas to City is unique because the pipeline is through the City. Mr. Thomas is leaving, Enstar could find a representative to handle. The construction season is starting, Enstar could find a person for this. Mr. Thomas attempted to negot iatn a contract., but could not. The City was not asked to help. The 60 day CITY OF KENAI APRIL 11, 1984 Page 4 period could be waived by KUSCO. Enstar has t to take all the gas they want starting next ye use it elsewhere. 5. Oscar Thomas, KUSCO. Regarding the burden on consumer to connect the lines. They are 400-5 from Enstar to the north, 700-800 ft. on the c side. Regarding the 60 day waiver, there has offer to reimburse the owners for time, value if the sale is held up. The decision would be the KUSCO owners. 6. Jim White, Far North Oil do Gas. If the City does not act on the motion and lets time take its course, there will be time because of the review process. Use the time you have to find alternatives. Councilwoman Bailie asked Mr. Senish is the 3 year period would be needed to keep tabs and if we would keep him on a retainer basis. Mr. Banish replied the City could monitor, a consultant is not needed. He noted Enstar could stand to lose $3500000 in good will. They may be able to pick the difference with the interconnection. 7. Mr. White said the City has not tried to develop other alternatives. VOTE, Main Motion as Amended (Passed): Yes: Bailie, Hall, Measles, Monfor, Wise, Ackerly Not Wagoner AOJOURNMENTs Meeting adjourn amed_ at 10 s 00 PM. OAriV Janet Whelan City Clerk APAROVID 1W COUNM fdr-1�9: t'!1'1' dim