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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 east side does have potential...and I have always thought Washington Scare should become an outlet mall. Anyone remember how popular Eastgate was? Well, Indy has no outlet malls, we have to go to Edinburgh for the deep discounts and I don't understand why. Jim is right. We need a few good eastsiders interested in actually making some noise and trying to change the commerce, culture and stereotypes of the East side. Irvington is very progressive and making great strides, why can't the far east side ride on their coat tails to make some changes?

      2. Boston.com has an article from 2010 where they talk about how Interactions moved to Massachusetts in the year prior. http://www.boston.com/business/technology/innoeco/2010/07/interactions_banks_63_million.html The article includes a link back to that Inside Indiana Business press release I linked to earlier, snarkily noting, "Guess this 2006 plan to create 200-plus new jobs in Indiana didn't exactly work out."

      3. I live on the east side and I have read all your comments. a local paper just did an article on Washington square mall with just as many comments and concerns. I am not sure if they are still around, but there was an east side coalition with good intentions to do good things on the east side. And there is a facebook post that called my eastside indy with many old members of the eastside who voice concerns about the east side of the city. We need to come together and not just complain and moan, but come up with actual concrete solutions, because what Dal said is very very true- the eastside could be a goldmine in the right hands. But if anyone is going damn, and change things, it is us eastside residents

      4. Please go back re-read your economics text book and the fine print on the February 2014 CBO report. A minimum wage increase has never resulted in a net job loss...

      5. The GOP at the Statehouse is more interested in PR to keep their majority, than using it to get anything good actually done. The State continues its downward spiral.

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