High utility costs strain MCPS

Rising natural gas and electricity prices have caused MCPS to anticipate a shortfall of about $4 million in the $32.5 million utilities budget for the current school year.

Marshall Spatz, director of MCPS's budget office, estimated the $4 million figure during a Jan. 4 interview with Silver Chips, calling it a "significant deficit." But he stressed that the state of the utilities budget will remain uncertain until later this spring, after MCPS has assessed the amount of spending during the winter months. At that point, the school system may either approach the Montgomery County Council to request more funding or reallocate money internally, depending on the magnitude of the shortfall.

To help offset utility costs in the meantime, Spatz said that MCPS will continue to implement pre-established energy conservation programs. Current efforts include the use of computerized heating and cooling thermostats in every school and MCPS's cooperative buying deals with other government agencies, which secure the school system bulk discounts on utility rates.

While these programs are not enough to erase the deficit, the efforts are working, according to MCPS Utilities Analyst Jeffrey Price. MCPS's energy use has grown negligibly over the past few years, even as the school system has added over one million square feet of new school space.

A spike in natural gas rates was the primary cause of the current projected shortfall in the budget, according to Price. "[Fuel] prices have been skyrocketing these past years," he said. "There has been no precedent for what has happened."

In the 2004-2005 school year, MCPS faced a similar utilities overspending crisis, also caused by higher-than-anticipated gas and electricity costs. That deficit forced the school system to request an additional $3.3 million from the County Council last February.

If the school system decides to request additional funds again, which Spatz believes is likely, it will encounter a sympathetic County Council. "There were just circumstances beyond [MCPS's] control," said Councilman Steve Silverman. "I don't see this as poor budgeting." Silverman said he "had no doubt" that an MCPS supplemental appropriation would receive the support of the Council.

The extra funds would come from MCPS's undesignated reserve, which is a sum of money that the county sets aside every year in situations such as these, according to county management budget specialist Charles Goldsmith. This year's reserve holds $144.6 million.

Although natural gas spending accounts for only about 25 percent of MCPS's utilities budget, Price explained that electricity spending — which represents over two-thirds of the budget — magnified the effect of the hike in gas prices, since electricity producers have become increasingly dependent on the clean-burning fuel. "Virtually all new power plants are fueled by natural gas," he said.

In the short term, Price predicts some relief from the high prices as more natural gas facilities in the Gulf Coast resume production after being damaged by Hurricanes Katrina and Rita. In December, prices fell from the October high of $10.97 per million cubic feet to $10.02, which was a sign of recovering prices.

Katrina and Rita crippled nearly half of the gas output in the Gulf, but they were not the sole cause of the high prices this winter. Before the hurricanes, the price for a million cubic feet of gas had already climbed from $5.52 in January to $6.69 in July, an increase caused by rising demand for natural gas, said Price.

This general rise in gas costs has caused MCPS's utilities budget to continue its steep upward trend. According to Price, the energy budget was around $20 million three to four years ago. This year, it is $32.5 million, and it will be $39 million for fiscal year 2007. Individual schools will not see any of this increase, since their utilities bills are routed to MCPS and paid for from this central fund.