April 15, 2008 — Jay Dow’s proposal to offer a financial incentive to Lassen Municipal Utility District customers who need electrical line extensions will not move forward. The LMUD Board of Directors killed the proposal when it voted 3-2 at a special meeting held on Thursday, April 10 not to hold a public hearing on the new program proposed by its vice president. Dow, one of three board members appointed by the Lassen County Board of Supervisors on Thursday, Dec. 27, and Wayne Langston were the only two board members to vote to hold the public hearing.

Fred Nagel and the other two appointed board members, Matthew Lavacot and President Bud Bowden, voted against holding a public hearing.

The supervisors appointed Dow, Lavacot and Bowden after the resignations of Darrell Wood, George Sargent, and Nancy Cardenas late last year left the LMUD board without a quorum.

Under Dow’s proposal, new users who needed line extensions would pay the district’s standard line extension charge of $15 per foot — about $80,000 per mile — in advance. In order to recover the cost of the line extension, the new customer would receive a 40 percent credit against actual usage. The credit would be available for a maximum of three years and would not exceed the cost of the line extension.

Under the proposal, a theoretical agricultural user would pay 14.5 cents per kilowatt. If the agricultural user took advantage of the new LMUD program and extended a line to operate a water pump, the user would receive the 5.8 cent credit and pay 8.7 cents per kW until the amount of the discount equaled the cost of the line extension or the three-year period had expired.

Had it been approved, the program would have been available to every LMUD customer.

Dow said his proposal was based on his business philosophy. He said as he reviewed the LMUD budget, he noticed the district’s fixed costs were fairly high — about 50 percent. Since the district is not a for-profit business, part of its mission is to keep the rates as low as possible. He said the only way to reduce those fixed costs is to sell more power.

Dow said it appears the district in the past has tried to lower its costs by having fewer customers and fewer meters, which he characterized as “the net effect of our policies.”

He pointed to the sale of the district’s territory in the Herlong area as an example. He said if the district stays the same size or gets smaller the only alternative will be to raise rates.

“This winds up being a good business decision,” Dow said.

Dow and his proposal drew strong criticism from members of the public and members of the board, especially Bowden. The heat of the criticism increased as the meeting went on.

Lavacot said he thought the program was clearly aimed at agricultural users. He said agricultural users who run pumps on diesel pay about 22 cents per kW, so LMUD’s rates already offer them an incentive to change from fossil fuel to electricity. And he said agricultural users have other incentives such as the Carl Moyer program as well.

He said Dow’s proposal, as it stands, benefits a small, select group of people.

Dow, who is a rancher with eight wells that could be converted from diesel to electricity, responded it was the needs of agricultural users that created the model, but “it applies to everybody.” He said some users will not switch from fossil fuel to electricity because of the cost of the line extension.

Nagel said Dow’s proposal was “interesting,” but he wasn’t sure if he had an opinion on it. He noted the agricultural community itself couldn’t agree on the validity of Dow’s proposal.

Two letters regarding the proposal were included in the board packet.

One from Joe Egan, the Vice President/Manager of Ag Services at Plumas Bank, supported Dow’s proposal.

“In my layman’s way of thinking, the agricultural producers would in effect be providing an interest free loan for the infrastructure improvement, and at the end of the period LMUD would realize 100 percent of the benefit of the additional load,” Egan wrote.

During the public comment section of the meeting, several ratepayers, including Lassen County Supervisor Bob Pyle, asked the board not to make such a large change until the new board members had been elected by the people.

Langston said the board took an oath to serve the district’s customers, and it had an obligation to review any proposal that would serve the ratepayers.

“I hope to hell that the decision that was made by the board of supervisors back in January was not simply to put the three of you here to fire (former general manger) Frank (Cady) and then sit here for 10 months and do nothing,” Langston said.

Dow also took fire because some, including Bowden, felt he had a conflict of interest because he would benefit from the proposal. Dow acknowledged he had eight wells at his ranch, and that he would benefit from his proposal. But he said his proposal would benefit everyone in the district.

Bowden even asked Dow not to vote on the proposal because he believed Dow’s ranching interests conflicted with his responsibilities as an LMUD director. He said the board had a quorum and could make a decision without Dow’s vote.

“No matter how you slice it, it’s still an ag subsidy bill,” Bowden said. “I think you have a conflict of interest, and it’s very well spelled out.”