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March 4, 2012

Posted Friday, May 4, 2012, at 5:24 PM

The prognosticators tell us that gasoline will be five dollars a gallon by this summer. Last summer when we were working on the budget for Malden's fiscal year of 2011-2012 I made a friendly wager with our city administrator, Mr. Bellars. He said gasoline would be $4 a gallon before our fiscal year ended. I said it would not. Initially, my position looked good. Gasoline dropped under $3 a gallon until a couple of months ago. It's hovering around $3.50 a gallon these days. I have three months left to win my wager. There is still about a $1.50 in slack before gas hits that $5 mark. I can remember selling gas for 14 cents a gallon, and I think 11 cents of that was tax. "Those were the days my friend, we thought they'd never end. Those were the days, oh, yes, those were the days." Gasoline at $5 a gallon will be a political issue.

The City of Malden does not sell gasoline, thank goodness. The City of Malden does sell electricity through its municipally owned utility known as the Board of Public Works. Electricity is a commodity that is publicly traded. The price of electricity fluctuates based on supply and demand. It has been said that to be a commodities trader you need the heart of a Mississippi riverboat gambler and nerves of steel. Some of you may remember the Hunt brothers who at one time controlled one of the largest personal fortunes in America. They decided to corner the silver market. When they were literally finished they were bankrupt.

Malden through the BPW has always been in the electricity commodities market albeit in a relatively small way. The BPW buys wholesale electricity, usually by contract on a long term basis, and then resells it to our community marking it up enough to cover expenses. In 2004 the BPW with the approval of the Malden City Council entered into an agreement with a Missouri State Agency (MJMEUC) to purchase a portion of the electricity to be generated by a not as then built power plant at Plum Point, Arkansas. The plant began producing and Malden began paying for their electricity in August, 2010. Between 2004 and 2010 there was a worldwide economic collapse that started in 2008. Wholesale electricity is now quite cheap. In fact it's cheaper than the price we are paying for the commodity we receive from Plum Point. Malden also does not need as much electricity as we receive from Plum Point, but we still must pay for it because we contracted for it. In 2004 the BPW wanted to guarantee Federal Mogul, the BPW's largest customer, the electricity they needed at a competitive price. In 2007 Federal Mogul closed up and moved overseas. Federal Mogul used roughly twenty per cent of the electricity used on any given day in Malden. Their move created excess capacity in our system.

All of the above leads to the question that our BPW must try to answer. Do we try and sell our share of Plum Point and buy cheaper wholesale electricity today, or do we try to weather the storm and have a guaranteed source of reasonably priced electricity in the future? No one has 20-20 foresight. The people who run your locally owned and operated utility (and that's all of us and we have since 1892) must try to make a decision. The question was a major topic last Tuesday evening at the monthly BPW meeting. One wonderful lady was there who frequently appears, and I guess she represents the general public as she was the only non board member or elected person in attendance. I ask you to ask questions because if we have $5 a gallon gasoline by this summer, you may be staying home more and running your air conditioners more. On the other hand, the Saudis may open the tap, the economy may start to boom, and our contract price for electricity may look just great. We are all commodities players whether we like it or not. Just for the record, the BPW had $68,000 in unpaid residential electric bills in the last twelve months.

The spring storm season is upon us. In March the City of Malden must approve its emergency management plan. I feel like we have made great strides in trying to decide when, where, and what we do if disaster hits our town. We have a long way to go, and it's always a work in progress. Stop by the city hall and pick up a copy of Malden's disaster plan. Learn where the designated storm shelters are. Prepare yourself and your family. If you don't already have a weather radio consider purchasing one. They are relatively inexpensive especially if the expense related to is your life or the life of someone in your family.

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