City faces tough choice on electricity
By Greg Rayburn \ Editor \ grayburn@sherwoodvoice.com
Friday, June 27, 2008 10:33 AM CDT
Sherwood City Attorney Steve Cobb held a workshop for aldermen Tuesday at the Bill Harmon Recreation Center to update them on a lawsuit involving Sherwood, North Little Rock Electric and First Electric Cooperative of Jacksonville.
Cobb had announced at a Sherwood City Council meeting Monday that he was planning the workshop to keep aldermen informed on the lawsuit.
He said Tuesday’s session should help aldermen prepare for votes involving the lawsuit.
Besides aldermen, Mayor Virginia Hillman, City Clerk Angela Nicholson and representatives from First Electric Coop attended. No representatives from the North Little Rock Electric Department were there.
“We want you to take the information presented here, give it some thought and then you can make a decision,” Cobb said.
Cobb told aldermen that the city soon will be making decisions about how it will proceed with the lawsuit.
On Jan. 17, Pulaski County Circuit Court Judge Timothy Fox rendered a judgment that had both good and bad news for Sherwood.
Fox determined that Sherwood had the right to enter into a franchise agreement with First Electric Coop. North Little Rock has provided electric service to Sherwood for nearly 70 years. However, Fox’s ruling also favored North Little Rock in saying that its electric company was entitled to several years worth of franchise fees from Sherwood. In the past, North Little Rock collected the fees from the 6,000 Sherwood customers it has serviced and then sent a lump-sum check twice a year to Sherwood. However, the necessity for North Little Rock to keep sending the checks stopped in 2003 because Sherwood signed a franchise agreement with First Electric, Fox ruled.
Cobb, the city attorney, said Fox’s ruling translates into Sherwood owing $2 million worth of franchise fees to North Little Rock. Fox’s ruling also states that Sherwood should pay North Little Rock $300,000 in legal fees.
Cobb said Sherwood could appeal Fox’s ruling if the council chooses. Such action would send the case directly to the Arkansas Supreme Court, he said.
Another option available to Sherwood is settling the case with North Little Rock. Cobb said he has met several times with North Little Rock City Attorney Jason Carter, who has advised him that North Little Rock is willing to waive the $2 million in franchise fees and $300,000 in attorney fees if Sherwood would agree to retain North Little Rock as the franchised electric provider through 2015.
Cobb said North Little Rock’s offer would release Sherwood from any obligations to North Little Rock after seven years.
City Alderman Steve Fender expressed doubt about the North Little Rock offer.
“I have questioned if North Little Rock Electric has bargained with us in good faith,” Fender said, “and I feel they have been trying to drag this out for years.”
Fender said one concern he has is that North Little Rock may contend after seven years that it may not be willing to sell its electric assets in Sherwood to First Electric at a reasonable price.
Fender said First Electric has valued North Little Rock’s electric assets in Sherwood at between $16-17 million, while North Little Rock is contending that its assets are worth $42 million.
For First Electric to be Sherwood’s electric provider, the company would need to either buy North Little Rock Electric’s infrastructure in Sherwood or build its own, according to Don Crabbe, president and chief executive officer of First Electric.
“The first option would be to buy their assets in Sherwood,” Crabbe said.
John Selig, attorney for First Electric, said the Jacksonville-based utility wants to be Sherwood’s electric provider.
Selig said Sherwood residents would benefit more from First Electric because the nonprofit electric provider is required to return any extra funds made during a year back to the customers.
Selig added that Sherwood residents would be protected by the Arkansas Public Utilities Commission. Sherwood residents now can only turn to North Little Rock’s officials if they have a grievance about service.
Selig added that Sherwood’s electric rates have been used to subsidize North Little Rock’s budget.
Cobb said he hopes Judge Fox’s decision that states Sherwood should pay North Little Rock $2 million in franchise fees is overturned if the case is appealed.
Alderman Charles Harmon agreed, saying that he believes the court’s ruling is incorrect because North Little Rock collected the franchise fees from customers and then sent a check to the city of Sherwood.
“That wasn’t money from North Little Rock,” Harmon said. “They collected the money. It came from customers.”
Cobb said he and other attorneys tried to argue that point to Fox but were unsuccessful in convincing him that it should make a difference in the way he ruled.
