Disadvantages of the Merger
1. The merger approval process was unfair to water users.
It is unfair for Central and Dawson to say that water users were late to the game in voicing opposition to the merger. Many water users were involved in the merger study early on, and some of us voiced our opposition in the first months of the study. But, it wasn’t until the final weeks before the merger vote that we were given a key piece of information — the board representation plan for the new district. That information made all the difference and is a key reason why many water users are against the merger. But, we had no time to act. The plan was released at an open house on Oct. 12. Less than two weeks later, on Oct. 24 during the middle of the busy harvest season, directors voted to proceed with the merger contrary to the request of the Central Water Users and others respectfully asking for a delay. Board representation is the price Central paid for this merger.
2. Water users lose local control of the water.
When the merger is complete, the new entity will eventually be governed by a 14-member board with just six representatives from the CNPPID’s chartered territory of Phelps, Gosper and Kearney counties. Directors living in Dawson, Buffalo, Lincoln, Keith and possibly other counties will make decisions that affect the water supply in Phelps, Kearney and Gosper counties. We think those decisions should be made by directors elected from the Tri-County area. When it comes to water decisions, we especially believe in local control.
Central says that with our water rights, we have no reason to be concerned about the merger. Below are three examples of CNPPID board decisions that affected our water supply but not our water rights:
1. In 1998, the board agreed to dedicate 10 percent of storable inflow into Lake McConaughy to instream flow purposes as a part of relicensing Central’s FERC Project. Our storage use rights in Lake McConaughy take subject to this commitment.
2. The board determines how much water is available for irrigation pursuant to the water service agreement signed by every water user. In 2006 and 2007, the board determined there was not enough water available for full delivery, and we had to adjust our operations accordingly.
3. Also according to the water service agreement, the board annually sets the rate for water service that we must pay. The rate fixed by the board can create an incentive to use more or less water. For example, the Incremental Pricing Conservation Credit Program adopted by the board created an incentive to conserve water.
Most importantly, the board has the authority to terminate our water service agreements with 10 years notice. Water rights attached to our land without a water service agreement with Central equals no water.
3. Tri County water users would be ‘insignificant’ in the new district
Currently, irrigation is the dog, and hydropower generation is the tail. The merger reverses that relationship. The electric ratepayer will be the largest constituency served by the merged district. At the Power Review Board hearing in December, a CNPPID lawyer said hydropower, not irrigation, is Central’s priority by revenue and that Kearney and Phelps counties will have too much representation in the merged entity based on population.
4. We are giving up influence to get influence?
We are told that the merger is needed to create a larger, more influential political district to wrestle with NPPD, NRDs, the state Department of Natural Resources, FERC, environmental groups and others. However, it appears from a water user’s perspective that we are giving up influence and control of water to get influence and control of water, which makes no sense.
5. The merger is about controlling the water, not electricity.
If this is about electricity, CNPPID could sell hydropower generation to Dawson PPD through a contract instead of a merger. A power purchase agreement between CNPPID and Dawson PPD would retain local control of water resources and still provide the same power generation/peak shaving for Dawson PPD (and others) creating a win-win for all. We are confident it is possible to be progressive and grow our local economies without a merger.
6. The merger is financially unfair to CNPPID.
CNPPID has cash reserves, no debt and estimated assets in the tens of billions of dollars, including Lake McConaughy and four hydropower generation plants and the associated water rights. Meanwhile, Dawson PPD comes into the merger with electrical poles and wires, meters, some maintenance/office buildings and millions of dollars of bonded debt.
CNPPID is already a strong company with a strong balance sheet. Its mission of providing irrigation to the Tri-County area is becoming more critical each year. Now is not the time to turn the company over to a new political base for no benefit.
7. Irrigators may pay more for water.
The water users are the only rate base of Central. If the merger occurs, there will be two rate bases: the irrigation rate base and the electric customer rate base. Historically, Central sells hydropower at a positive margin, and that margin keeps irrigation rates affordable and allows Central to properly maintain the hydro irrigation system. It is no accident that our irrigation infrastructure is exceptional compared to others. With a second rate base that is clearly the controlling rate base ($77 million in revenue and 23,000 meters), we are skeptical the hydropower margin will continue to benefit the irrigation system as it has in the past.