Wayne State to Public Lighting Department: We won't pay extra money - The South End: News

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Wayne State to Public Lighting Department: We won't pay extra money

CFO says new electricity surcharge is 'bad business'

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Posted: Wednesday, July 23, 2014 9:30 am

Wayne State was slapped with a $2.5 million bill – and they’re not paying

The outstanding bill has been growing ever since the office of Detroit’s emergency manager sent notices to Wayne State University, the Detroit Medical Center and more than two dozen other companies that are customers of the Public Lighting Department.

The outstanding amount

In late 2013, Detroit’s emergency manager Kevyn Orr and Gary Brown, group executive for operations, notified PLD customers in a letter that a surcharge would be added to current electricity bills to recoup prior losses.

The surcharge nearly doubled the normal electricity bill, adding $500,000 to the bill each month. 

“A little more than half of our buildings are supplied with electricity by PLD and the rest of them are by DTE,” said Rick Nork, WSU vice president for finance and business operations, treasurer and chief financial officer . “The amount that we pay PLD is about $6 million a year and this surcharge would have increased our annual cost by about $5.5 million.”

Each bill is split into two parts: the bill for the electricity usage of that month from PLD and a calculated loss recovery surcharge. Nork said the university does not have a problem with the first part of the bill; they are only disputing the surcharge.

We’re not paying

WSU argues that the surcharge is invalid and is refusing to pay the full amount.

“We paid for the electricity we are using this year and we have refused to pay the surcharge amount,” Nork said. “We have formally notified (the city) that we take exception from the surcharge.”

The city has not responded to WSU’s rebuttal to the bill. WSU and the city have not discussed reducing or forgiving the amount the university allegedly owes. The PLD could not be reached for comment.

Nork added that the PLD’s surcharge process is not acceptable.

“This was created by PLD and by the emergency manager’s office as a way to recover losses in prior years, which is not an appropriate business practice,” Nork said. “We dispute that.” 

RELATED FREEP ARTICLE: Detroit says medical center, Wayne State owe millions for electricity 

What happens next?

There is one thing that may stop the overdue amount from increasing. On June 28 of last year, the emergency manager’s office announced that DTE Energy would be slowly taking over PLD’s customer base. DTE is expected to stop adding the surcharge as it is not ran by the city or the Emergency Manager’s office. 

Nork expects the surcharge to end when the DTE takeover is complete and hopes the city will not continue the collection, but he understands that may be a possibility. 

“They certainly have the option to continue to pursue this; that is totally up to them,” he said.

RELATED CRAIN’S ARTICLE: DTE to take over Detroit's electric department

What can students expect? 

Students will not be affected by this dispute, Nork said. The bill would fall onto his office and not on the backs of students. The outstanding amount was not a part of the upcoming fiscal year budget approved by the Board of Governors, and paying that bill would mean taking money away from other things. The budget, which was balanced, did not expect or make changes to accommodate paying the amount, Nork said. 

“That is $2.5 million we don’t have to spend on other things,” Nork said.

Nevertheless, Nork is adamant this “one-time charge” would never affect students at the university. 

“If we do have to pay it then…we would do everything in our power to make sure it didn’t have any impact on any student-related programs or activities, classrooms – whatever,” Nork said. “We would have to find the funds to cover on a one-time basis and we would do whatever we needed to do to make sure it never impacted academic programs.” 

The only way students would be affected by the dispute is if another forced blackout of PLD-serviced buildings occurs on campus.

Shutoffs

After sending notices to other, smaller companies in Detroit about the outstanding bills, PLD began shutting off power starting in June. The shutoffs began with buildings that the city considered “most delinquent” according to a Detroit Free Press article that broke the story.

WSU was not considered delinquent by the PLD, and has not experienced any shutoffs since the announcement, despite owing the most of all known companies reported by the Free Press.

Nork believes a shutoff is unlikely, but knows that PLD has the ability to make it happen, he also said no one from the city ever threatened to shut off power to the university.

“The only time we ever heard of a possible shutoff was through the media. We received no notice from PLD or the emergency manager,” he said.

Looking towards the future

The dispute is expected to end after DTE takes over from the PLD. Nork said that he is confident that an issue like this will not happen again, especially with DTE providing the power.

“The biggest difference here is that DTE is a public utility (company) and is regulated by the Michigan Public Service Commission and their rate structure has to be approved by this commission,” Nork said. “PLD is not regulated, so I think it would be very improbable that anything like this would ever happen again once DTE takes over.”

Nork said he expects to continue the normally positive relationship with Detroit.

“We have an excellent relationship with the city and we partner with and support the city on a lot of their initiatives,” he said. 

This dispute is unusual for WSU’s relationship with the city. However, the university will move forward with its challenge, said Nork

“It’s just unfortunate they elected to go in this direction. We just don’t think it was the right thing to do, and we are going to continue to dispute it.”

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