Growth Slow-down Felt At Overton Power District

By Vernon Robison
Moapa Valley Progress
Submitted March 26, 2008

The recent dramatic slow down in growth for the Moapa and Virgin Valleys is causing the Overton Power District (OPD) to begin tapping into cash reserves for the first time in several years, according to a financial report given at the OPD board meeting on Wednesday, March 19. OPD cash balances have been trending gradually downward from a high in April 2007 through the end of February 2008, said OPD General Manager Delmar Latham. Latham attributed this trend mainly to the slow down in development in the communities. During construction of new development projects, the OPD receives something it calls ‘Contribution from Construction’. This may include power lines and infrastructure that the developer pays for and installs and then dedicates over to the district as a non-cash asset. But it may also include cash payment to compensate OPD workers while they install the necessary infrastructure for the project.

“Contribution from construction can pay a good percentage of the salaries for district workcrews,” Latham said. “This is a percentage that the developers pay for and, thus, is not coming out of the district’s funds.”

But with the current slow-down in growth, that source of funding to the district has nearly dried up.

In addition, connect fees for new residential service is currently at a long-time low. During the month of February the district saw only two new hook-ups for residential service. “It’s been a long, long time since our hook-ups were that low,” Latham said, “well over 4-5 years, in fact.”

Finally, throw into the mix the fact that the cost of power is currently trending steeply upwards. This fact significantly increases the district’s single highest expense all while the growth driven sources of revenue has simultaneously decreased.

“All of this tends to give us a little heartburn,” Latham said. “The reason we’re seeing the curve on the cash in the bank account coming down is because we are spending more than we made. We are starting to spend our own money instead of money from the developers.” The good news is that the OPD has a healthy cash reserve of about $9 million in the bank. Latham, thus sees the current slowdown period as an opportunity for the district to prepare for the future.

“This is an opportunity to do a lot of work and repairs that should be done by the time that growth takes off again,” Latham said. “We have the money to do this now. We need to have that work done to prepare. So we may continue to see some dropping in the cash reserve. But hopefully it will prepare us for a growth turnaround in 3-4 years.”

Still, Latham hopes to see a leveling out to the plummeting growth statistics in the area soon. “If it continues to trend down over an extended period, we may need to look at a rate increase,” he said.

To prepare for that possibility, the OPD Board voted to authorize staff to perform a cost of service rate study for the district. The district has just recently completed a financial audit for 2007 and will send the newly audited numbers to the Rural Utilities Cooperative Financial Corporation (CFC) to perform a rate study. “Their people will perform a cost of service to see if we are charging enough to pay our bills,” Latham said.

In the meantime, the OPD staff will take the same numbers and do a separate study to see how closely the numbers match.

“If I come to the board at some point in the future and ask for a rate increase, I want to be able to justify it with an independent source to confirm that it is needed,” Latham said.