Power board debates selling transformer capacity to speed development; impact-fee amendment planned

Hurricane City power staff on Wednesday discussed a proposal to let developers purchase transformer capacity up front and to amend the city's impact-fee study to add two new substations the city expects will be needed for near-term growth.

The idea, presented by power staff, would let developers pay a proportionate share of transformer capacity required for their projects so the utility could purchase and stock long-lead items (transformers, regulators) and reduce multi-month waits. Staff said the approach could lower the portion of substation cost carried through conventional impact fees and provide spare equipment for emergencies.

"It's kind of gonna implement an upfront fee for capacitance for developers on capacitance projects," the presenter said, describing fees set proportional to transformer sizing. He added lead times for transformers can be a year to a year-and-a-half and that having assets on hand could speed development and reduce outage risk.

Board members asked how the proposed capacity payments would interact with existing impact-fee law and reimbursement vouchers the city already uses when developers bond and build infrastructure. Multiple members said the concept might improve timelines for developers but also creates legal and contract risks that must be spelled out.

"If the city accepts money, there's gonna be expectations there, and we need to manage those contractually," one council-affiliated member said during the exchange.

Questions raised included whether capacity purchased but unused by one developer could be reallocated, how the city would guarantee the money is spent for the infrastructure purchasers expect, whether the capacity charge would be optional or mandatory, and how to avoid double-charging developers (capacity plus impact fees). Staff said they would place capacity receipts in a separate fund and recommended creating contractual language to guarantee capacity without automatically obligating the city to build unrelated transmission or distribution work.

Staff also explained how the measure would interact with the city's current reimbursement practice: developers can front costs for substations or transmission work and receive vouchers or reimbursements under existing impact-fee rules, but vouchers can only be issued for projects listed in the impact-fee exhibit. That is why staff also proposed amending the impact-fee study to add the two substations developers are requesting.

Board members asked staff to prepare written language and clarifying financial analysis before the proposal goes to the city council. Several members asked for calculations showing whether the measure would be revenue-neutral for developers or would increase their upfront cost, and what contractual protections the city would require to avoid litigation from later property owners.

Staff said they will draft ordinance and contract language, coordinate with the city attorney and impact-fee consultants, and return with a more detailed plan for the power board to review.

Ending: Directors agreed the proposal merits further work but is not ready for action. Staff were asked to prepare detailed financing and ordinance drafts to address legal safeguards, reimbursement mechanics, and how purchased capacity would be tracked and used.