Cairo Public Utility

Cairo Public Utility operates a combined municipal electric, natural gas, internet, and hardware store. Directly behind CPUC is the Connell F. Smith and Sheumaker abuildings, residential public housing complexes managed by the Alexander County Housing Authority. 

CAIRO — The Southern Illinoisan has filed a lawsuit in Alexander County Circuit Court alleging that Cairo Public Utility Co. is improperly withholding public records sought under the Illinois Freedom of Information Act.

The newspaper sought public records from Cairo Public Utility Co. earlier this summer as part of its ongoing reporting of a housing crisis in Cairo and separate but parallel issues concerning challenges to economic recovery in Alexander County.

Residents, business owners, government agencies and nonprofits operating in Cairo have complained of high electric and gas bills for years. Federal housing officials also have raised concerns about utility bills in Cairo since taking over day-to-day operations of the Alexander County Housing Authority on Feb. 22, 2016, citing years of mismanagement and alleged civil rights violations.

In an April financial review of the housing authority, Housing and Urban Development cited “abnormally high utility costs” among top reasons why the housing authority was insolvent and on the brink of collapse without significant corrective action.

Representatives from both HUD and the utility company said the parties worked out an agreement for short-term cost relief, but such a deal does not address the broader issue of utility costs hamstringing economic revitalization efforts.

There has not been any new residential construction in Cairo in 40 years. The lack of development in the city — both residential and commercial — has become problematic as HUD prepares to raze two large public housing complexes and relocate close to 400 people outside of Alexander County because of a lack of affordable housing options in Cairo. HUD officials also have said that because the economy is so depressed, they have been unsuccessful to date in finding a private developer willing to partner to build new housing in Cairo.

High utility costs also have been cited as a roadblock in efforts by federal housing and city officials to secure a private developer to partner with the government in the construction of new affordable housing.

“As is the case anytime we encounter concerns about a potential problem in a community in our coverage area, our reporters tried to get to the bottom of the many complaints we had heard about high utility costs in Cairo,” said Executive Editor Tom English. “In July, we published a seven-part series on the utility costs and related issues after speaking to utility company executives, residents and numerous others.

“But in light of the housing crisis playing out in Cairo, and the serious challenges this community is facing, we thought it was necessary to review and publish public records that would be standard for any other municipal electric agency in the state of Illinois to make available for inspection.”

The newspaper was unable to reach Cairo Public Utility or its attorney, Mark Johnson, of the law firm Johnson, Schneider & Ferrell LLC, for comment on the lawsuit. 

Cairo Public Utility Co. denied two separate requests for information filed by Reporter Isaac Smith on behalf of the newspaper in May and June. In the initial FOIA request, filed May 24, Smith sought from the utility its past three years’ Form 990s, which are IRS documents filed by most tax-exempt bodies.

The utility responded to Smith’s request by stating they are “not required to file Form 990 with the IRS.” Additionally, the utility attached to its response a copy of an advisory opinion from the Illinois Attorney General opining that CPU was not a “public body” for the purposes of FOIA and therefore is not subject to the requirements of the act. In his second request, Smith sought the utility’s last three complete financial audits and detailed salary information for CPU board members and administrative staff.

The opinion from the Attorney General’s Office that the utility company provided in response to both requests was issued in 2010. Around that time, a private citizen had asked for an opinion from the Attorney General’s Public Access Bureau after she was denied records she had sought under FOIA law.

The Southern Illinoisan claims in its lawsuit that the Attorney General’s opinion did not consider Section 7(2) of the act, which states that public records held by a party that is not a public body but “with whom the agency has contracted to perform a governmental function on behalf of the public body, and that directly relates to the governmental function …” shall be considered public for purpose of the act.

According to the lawsuit, the city of Cairo, in 1995, passed an ordinance that authorized and approved a Municipal Utility Transfer Agreement enabling the CPU to operate a municipal electric and gas utilities owned and operated by the city. The ordinance states, according to the lawsuit: “Providing electric and natural gas energy to the residents of the city and areas outside of the city served by the utility are an essential governmental service of the city.”

The ordinance also states that CPU was “formed for the purposes of operating the utility on behalf of the city.”

Additionally, during a June 14 interview with the newspaper, Cairo Public Utility Co. General Manager Larry Klein told the newspaper that the nonprofit utility was formed in 1995 “as an instrumentality of the city of Cairo.” Klein was explaining how the utility was able to remain a member of the Illinois Municipal Electric Agency, its wholesale electric supplier based in Springfield, which serves exclusively municipalities with the exception of the nonprofit CPU, which is a quasi-municipal entity. 

Don Craven, an attorney with the Illinois Press Association, is representing the newspaper in this case. Funding for the lawsuit is through a partnership between the newspaper and the IPA’s Legal Defense Fund. The Southern Illinoisan is a member newspaper of the IPA, the largest state newspaper association in the country.

HUD, in its financial review of the Alexander County Housing Authority, in explaining why CPU’s rates are higher than its peers, stated that CPU is an Illinois nonprofit that is not regulated by the Illinois Commerce Commission and therefore able to “pass on most, if not all, of its costs to its customer base.” “Further, due to its remote location CPU has a limited number of customers over which to spread its costs, resulting in rates higher than the industry average.”

Klein, CPU’s general manager, said in the June interview with the newspaper that the senior HUD staff had paid a visit to the utility company to ask for rate relief. Klein said they were disappointed by the request from HUD, but said they did work out a deal to help them reduce costs. He said that CPU could not offer the housing authority a rate relief without doing the same for all customers in the same rate class, which Klein said the utility could not afford to do.

In its report, HUD said its Alexander County developments are serviced by CPU and Ameren, though it appears from reviewing public records that the ACHA’s largest payments are to CPU. The report said the ACHA’s total utilities expense of $197.04 per unit month for 2015 was more than double the $86.78 per unit month compared to similar sized housing authorities in the Midwest.

In a follow-up interview, Klein, and Todd Ely, a Springfield consultant working on behalf of the utility, said that electric rates in Cairo are problematic. But they pointed fingers toward their wholesale supplier in Springfield, the Illinois Municipal Electric Agency. Ely blamed the high rates on a poor management decision made by IMEA executives to purchase about 15 percent of the Prairie State Energy Campus, a mine-to-mouth coal fired energy plant in Marissa that came online in 2012. Ely said cost overruns and early inefficiencies at the plant have driven up electric rates for member organizations.

In previous interviews, IMEA executives defended the decision to buy into the plan that was backed by St. Louis-based Peabody, at the time the nation’s largest coal producer, but that has since sold its last remaining shares. IMEA argued that the Peabody plant was but one investment in a diverse portfolio managed on behalf of its members that also includes renewables and long-term supply contracts for the purchase of electricity from coal, natural gas and diesel units.

IMEA also noted that a representative of CPU sits on the IMEA board and voted in favor of the purchase. Staci Wilson said that IMEA is not to blame for Cairo’s economic woes, but recognizing the difficulties the member city faced, she said at the time that IMEA did offer the city a wholesale rate break in an attempt to help them out. Ely said it was not enough to correct the problem of excessively high rates.

IMEA has about $1.3 billion in bond debt on its books for its electric piece, according to its most recent audited financial statements. Cairo, a city of about 2,400, purchases about 1.7 percent of the power supplied by IMEA, and therefore is responsible for about $22 million of the bond debt, which is why IMEA is unlikely to release CPU from its contract without significant penalties. If CPU isn’t purchasing its share, the debt load would have be spread out among IMEA’s other members, and the other municipalities likely would resist.

The contract between CPU and IMEA expires in 2035. The contract between CPU and the city of Cairo expires in 2028.

molly.parker@thesouthern.com

618-351-5079

On Twitter: @MollyParkerSI ​

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Molly Parker is general assignment and investigative projects reporter for The Southern Illinoisan.

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