To the Editor:
Middle Tennessee Electric Members’ Cooperative (MTEMC) first publicly proposed acquiring Murfreesboro Electric Department (MED) from the City of Murfreesboro in May 2015. This proposal came in the form of a memorandum of understanding, signed by the City of Murfreesboro and MTEMC, outlining their mutual desire to explore selling the city’s electric department to the Cooperative.
In the memorandum, the Cooperative set the base price for the acquisition at $150M, an amount far below an outside consultant’s appraisal of approximately $250M. Soon after, the Cooperative withdrew its offer to purchase Murfreesboro Electric from the city.
At the time, I and many of my fellow citizens were against the sale in light of the facts before us. Murfreesboro Electric was a very well run, city-owned electric utility. It made a considerable profit which it remitted to the city’s general fund — something called a Payment in Lieu of Taxes or PILOT.
While Murfreesboro Electric continues to offer world class service and is still profitable, it is less profitable than it was before. And, nearly four years later, it seems our city’s leadership is still keen to sell Murfreesboro Electric Department to the Cooperative.
If the City Council decides the best decision is to sell Murfreesboro Electric, what would a good deal look like? What would be the best approach? Some things to think about:
Legal Concerns — Is it legal for the City to negotiate with only one buyer? Should investor-owned utilities be allowed to bid for Murfreesboro Electric? Is it legal for the City Council to vote to sell Murfreesboro Electric? Some say there is a precedent for this. Others say the Municipal Power Act forbids it and a sale would require a referendum. Which is correct?
Price — We have been building and operating Murfreesboro Electric since 1939. It is profitable. When it is sold it will be gone forever. Murfreesboro Electric customer density is high which makes it less expensive to deliver power on a per customer basis than in a rural setting where most cooperatives operate. This is highly coveted and we should expect to field an offer higher than the previous $250M valuation.
Rates — We have been told that the Cooperative’s rates are “comparable.” This is likely spin for the Cooperative’s rates are “higher.” If they are the same or lower, they would have said “the same” or “lower.” The City should put forth a plan to mitigate the effects of any rate increase caused by the acquisition, particularly for those on fixed incomes.
Service — Cooperatives have a mandate to provide the cheapest power possible to their customers. This means that substations are often surrounded only by chain link fences, even in residential areas, utilities are not placed underground for high profile public and economic development projects and street lights are obtained at the lowest possible price. The city should negotiate a standard of service that matches what Murfreesboro Electric is providing now.
Cooperative Board — The City of Murfreesboro should receive Cooperative Board seats based on its share of overall customer base of the cooperative. The last acquisition offer included one board seat which is roughly half of what Murfreesboro’s share would be in a proportional scenario.
Enforcing Any Agreement — What happens if the buyer doesn’t hold up their end of the deal? Can we get our power company back? The answer is likely no. The City of Franklin tried to take control of power distribution back from the Cooperative and was met with stiff resistance in court. We should expect that once Murfreesboro Electric is out of our hands, it is out of our hands.
I encourage all to do their homework and makeup their own mind. Reach out to the City Council, ask questions, and let your voice be heard.