City approves establishment of electric utility on first reading
Date posted: March 18, 2014
SHERIDAN — In an effort to establish redundant power in the High Tech Business Park and draw data centers, light manufacturing and other businesses to the area, Sheridan City Council on Monday voted 5-0 on first reading to pass an ordinance that will create a city owned electric utility.
City Councilwoman Kristin Kelly, who works for Powder River Energy Corporation, recused herself from the discussion and the vote.
The creation of the utility will allow the city to apply for state funds to build electrical infrastructure into the Wrench Ranch area north of Sheridan, which currently houses Vacutech and Ptolemy Data Systems but does not have suitable electrical capabilities to service the additional data centers and technology businesses the city seeks to establish.
Public Works Director Nic Bateson said the city would act as a conduit for state funds — primarily business ready grants that allow infrastructure to be built in advance of growth to promote job creation — and would contract out to a company such as Montana-Dakota Utilities for actual construction, operation and maintenance of the system. Mayor Dave Kinskey said establishing redundant power is one piece of a much larger puzzle in the city’s quest to boost economic development.
“I think 30 or 40 years of talking about economic development is enough. Let’s do something about it,” Kinskey said.
Kinskey also noted that site selectors for data centers and other companies are often more like site “de-selectors.”
He said that they know what they need and if a city doesn’t have it, they cross them off the list and move on.
Discussions about how to enhance power service in Sheridan have been ongoing since 2010, Bateson said. At that time, MDU said it would need $300,000 to extend electric service to the High Tech Business Park in advance of actual businesses setting up shop. The city did not have that much money at the time, so it agreed to pay MDU $58,000 to construct an electric line to the area with the understanding that MDU would recapture its initial investment within five years. The line offers enough power to service Vacutech.
The city had hoped that an electric company like MDU would be willing to invest in establishing redundant power to the area, but MDU representatives have said that due to limitations with stakeholders, MDU cannot build infrastructure in advance of growth. That is why the city hired Guernsey Consultants to look at other alternatives for establishing redundant power.
A memo from Bernard Cevera, a consultant with Guernsey, to Bateson dated March 10 recommended the city create a municipal electric utility in order to obtain state funds to build the power line. Cevera also recommended the city work with MDU to design, plan and operate the system.
Attorney Bruce Asay, who works for Associated Legal Group in Cheyenne and was representing MDU, spoke at the council meeting. He said MDU agrees with the sentiment that Sheridan needs redundant power to attract data centers, but that they do not support the ordinance as it is written.
Asay said Ordinance 2144 was too broad because it allows the city to operate as a complete electrical utility — able to build and operate the system — rather than just to procure funding and then contract with a company like MDU for everything else.
“Don’t empower yourself to do what you don’t want to do,” Asay said.
Asay also said he was worried that state funds are limited and that if the business park doesn’t grow as hoped, the state will see it as a poor investment and shy away from similar investments in the future. He encouraged the council to either table the ordinance or amend it to seek a better partnership with MDU.
Kinskey noted that in earlier discussions he’d had with Asay, there was concern expressed that MDU didn’t want competition. Asay concurred.
“We are concerned with a public entity competing with a private enterprise,” Asay said.
Before council comment, Project Manager for the North Main Association John Heyneman and owner of Ptolemy Data Systems Ryan Mulholland spoke in favor of the ordinance.
City Councilwoman Shelleen Smith, who attended and voted via speaker phone, said creating a city electric utility was another tool in the city’s toolbox to spur economic growth.
Councilman John Heath said he would support the ordinance as it was written and that MDU should not ask the city to partner with them but rather they should consider it a partnership with the city.
“MDU needs to be flexible,” Heath said.
Ordinance 2144 was passed on first reading with the understanding that MDU and the city would work together on language amendments that would be acceptable to both parties. The second reading will be April 7.