MEMPHIS, Tenn. (WMC) - As MLGW continues power restoration efforts after Monday morning’s storms, a new consultant’s report has identified efficiencies the utility could make to save money, including cutting jobs and closing community offices.
MLGW has asked the Memphis City Council to raise utility rates to fund infrastructure improvements. The issue was much debated in late 2018 and in early 2019, and the council only signed off on water rate increases, not gas or electric. In voting down the proposal, council members suggested that MLGW should identify internal cuts before coming to customers.
“I’m open to any type of practical cost savings that are placed on the table,” said Martavius Jones.
Memphis City Council member Martavius Jones advocated for gas and electric rate hikes earlier this year among his council colleagues. But the hikes did not pass. He said Thursday the city must invest more in infrastructure, especially in the urban core.
“MLGW serves all of Shelby County, not just Memphis. A lot of the investments, on the newer equipment if you will, took place out east,” said Jones.
Consultants brought in by MLGW presented findings of a study Wednesday to MLGW’s board. The study identified $92 million worth of savings over 5 years. The utility paid $430,000 for the study.
The analysis found MLGW has 11 to 13 percent more staff than comparable utilities and called for consolidation of 300 to 400 jobs. The effort could save $30 to $35 million over multiple years. Consultants noted, to do this, the utility needed to improve processes and fully leverage technology improvements.
Consultants also suggested MLGW shutter its four community offices and drive customer interaction online. They believe the downtown office should be the only one open. The proposal calls for closing the Millington office first, followed by the North office on Summer Avenue, the Whitehaven office on East Shelby Drive, and the south office on Lamar last. Consultants said they believe foot traffic can easily be absorbed by the downtown office.
The report calls for streamlining and improving MLGW’s procurement process, noting that it takes too long to purchase items. Consultants suggested easing policies on requiring approval by Memphis City Council for the utility to make purchases.
Consultants called for simplifying MLGW’s customer care policy and implementing more strategic IT planning. The report notes that the utility often carries too much inventory, which increases carrying costs, and in certain cases MLGW runs into bottlenecking because of a lack of inventory.
Analysts reported the utility is a “good value with reliable power at low cost” but cited capital needs like distribution automation and technology. Perhaps most critically, they also acknowledged the system is becoming “unreliable.”
MLGW President and CEO JT Young spoke to reporters Thursday and said job cuts would not be immediate.
“Our intention is through attrition over five years to accomplish the recommendations set forth in the study,” he said, “We were planning to look at ways we could be more efficient, optimize our operations, and so we opted to do that in this manner (referring to hiring a consultant). But what didn’t change are the infrastructure needs.”
Young says MLGW is committed to streamlining how it does business while also cutting costs. He said the utility will soon be back before council members to ask for another set of rate increases as part of a $1 billion modernization plan. Young notes the ask this year is 24 percent less than what they asked council members for last year.
“We certainly have our challenges. And this is a third party that’s telling us this, that’s given us a risk analysis. I would ask that everyone look at that,” he said.
Documents from MLGW show an electric rate increase of 4.2 percent would go into effect in July 2020, followed by increases of 1.5 percent in January 2021 and again in January 2022. Gas rates would increase 2 percent starting in January 2022. Water rates would increase 15 percent in July 2020, followed by 7 percent in January 2021 and 5 percent in January 2022. These figures, approved by the MLGW board, are just utility proposals and would need council approval.
“I look forward to reviewing the report in detail, so we can move forward with a plan to deliver the best service, invest in infrastructure, at a fair price,” said Memphis City Council Chair Kemp Conrad, who is currently traveling out of the country.
A spokesperson for Memphis Mayor Jim Strickland declined comment Thursday, saying the mayor has just recently received the consultant’s report on MLGW and has not thoroughly reviewed it.
MLGW is also in the midst of an Integrated Resource Plan (IRP) to determine whether cost savings could be achieved by stepping away from the Tennessee Valley Authority (TVA) as a power supplier. The next meeting of the agency’s Power Supply Advisory Team (PSAT) is scheduled for Thursday, November 7 at the Hooks Library on Poplar Avenue. The final report with findings is expected to be made public in the spring of 2020.