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Citizens Energy projects greater, faster savings from deal

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Citizens Energy Group says savings from combining the city’s water and sewer utilities will be 13 percent higher than expected and come two years sooner than previously predicted.

The company Tuesday said it expects to record savings of $68 million—$8 million more than initially projected—by September of this year rather than in 2014.

Citizens, which bought the city’s water and sewer utilities last year for $1.9 billion, said the improved outlook is based on financial results through Dec. 31.

Critics of the deal had argued that many of the savings projections were bogus and that local oversight of the utilities would be relegated to the scandal-plagued Indiana Utility Regulatory Commission.

Indianapolis Mayor Greg Ballard successfully pitched the sale on grounds that it would generate more than $425 million in proceeds for the city. Most of that money has been pledged to road and bridge repairs.

Citizens said many of the savings would come from eliminating duplicative functions and through savings from joint material purchasing, for example. The deal also reduced employee headcount. The utility now employs 995 people compared with 1,200 full-time workers prior to the sale.
  
“We publically promised that the transfer would add value to the community through safe, affordable utility services … By achieving annual savings two years ahead of schedule, we’re putting that promise into practice,” Citizens CEO Carey Lykins said in a prepared statement.
  
Citizens said the projected savings should help temper future rate increases, expected in part due to federally mandated projects to eliminate raw sewage overflows into waterways.
 
Indianapolis’ combined sewer/storm water system is being modified to include a deep tunnel to be bored beneath the city to capture storm water. 
 
The IURC last year approved a 26-percent water-rate hike to help pay for the project. Sewer bills are to rise at least 10.75 percent.

The $1.9 billion sale of the utilities has been a boon for lawyers and consulting firms. For example, prominent Indianapolis law firm Ice Miller stands to collect at least $3.42 million in fees.  Also, the city paid the previous operator of the water utility, Veolia, a contract breakup fee of $29 million.
 
 

 

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  • Savings
    I think you did misunderstand it, K.B. The way I read the materials, the savings include the total cost of running the operations, including the cost of all financings and borrowings.
  • Not the way I understand it.
    I thought the interest paid on having to borrow their operating capital outweighed any savings that would be realized that would result in a net loss for the overall savings of the sale. Am I mistaken?
    • Reply
      Hi, Rob---My name is Mike Strohl and I am the Vice President of Customer Relationships with Citizens Energy Group. We understand the frustration that yu and other customers feel about the Western Union fee that is paid by water customers. Unfortunately, we are bound to the terms that were in place when we acquired the assets until we migrate to a combined billing system. We are anticipating the combined bill to go live this fall. Once the systems are migrated, the policies will be the same and customers will not incur a fee for on-line payments. Additionally, water customers will have access to budget bills, e-billing and access to historical billing information via our website. If you want to discuss this further, feel free to call me during business hours. You may reach me through our switchboard at 924-3341. Thanks for your question.
    • payment fees
      Can someone explain why, if I pay my water bill online, I have to pay a service charge. But, when I pay my gas bill online I don't have to pay a service charge? Makes no sense to me.
      • Chlorine Water
        Indianapolis Water customers are complaining about chlorine smell in tap water.

        Citizens Water says its still safe to drink, BUT.......

        As a precaution, customers undergoing dialysis treatment should contact their hospitals and/or local dialysis centers for appropriate treatment adjustments.

        They recommend Tap water sit in an open container overnight to allow the disinfectant to dissipate before filing tanks or watering sensitive plants such as orchids.

        In addition, homeowners or restaurants that utilize reverse osmosis may want to make adjustments to the filters within their systems.



        http://www.citizensgas.com/news.aspx?nid=219
      • Higher Water Bill Excuses
        Sounds like a lot of smoke and mirrors to hide huge problems.

        Guess they want to create some positive PR before Mayor Ballard has to testify in Washington DC about this water deal.

        Citizens Blames Higher Water Bills On Meter Readings

        Indianapolis-based Citizens Energy Group is blaming higher water bills on a fluctuation in read dates on meters and an outdated bill estimation system.

        http://indianapublicmedia.org/news/indy-company-blames-higher-water-bills-meter-readings-27280/

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      1. The $104K to CRC would go toward debts service on $486M of existing debt they already have from other things outside this project. Keystone buys the bonds for 3.8M from CRC, and CRC in turn pays for the parking and site work, and some time later CRC buys them back (with interest) from the projected annual property tax revenue from the entire TIF district (est. $415K / yr. from just this property, plus more from all the other property in the TIF district), which in theory would be about a 10-year term, give-or-take. CRC is basically betting on the future, that property values will increase, driving up the tax revenue to the limit of the annual increase cap on commercial property (I think that's 3%). It should be noted that Keystone can't print money (unlike the Federal Treasury) so commercial property tax can only come from consumers, in this case the apartment renters and consumers of the goods and services offered by the ground floor retailers, and employees in the form of lower non-mandatory compensation items, such as bonuses, benefits, 401K match, etc.

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