Education Matters US

On Thursday, I had the opprotunity to meet with Ken & Jason Falkingham who administer the IUPC. The IUPC is an intergovernmental consortium of schools and other taxing bodies who buy electricity and natural gas as a group in an attempt to save money. Bruno Behrend of Extreme Wisdom was also present at the meeting to help make sure we didn’t forget any questions.

Ken Falkingham has administered the IUPC for 20 years now and it has existed for 21 years. The first administrator costs the schools a great deal of money which is what prompted the Board of Directors to hire Ken. There are 5 Board of Directors who are elected by the membership. The current Board of Directors are:

• Bill Harkin – Wauconda Unit (Chairman)
• Charlie Cohen – Aptakistic Elem
• Don Goers – New Trier High School
• Audrey Liddle – Lake Villa Elem
• Christie Sefcik – Grant High School

This consortium now has 99 members (See Participants List) and all members are required to buy both electricity and gas. There a exceptions, but they are only until existing contracts expire like the gas contracts in Elmwood Park, Buffalo Grove Park District, and Cook County Library. Waste management is a service that is now used by 10-12 members.

NOTE: This make 78 taxing bodies who buy energy without bidding their contracts.

Ken informed us that the majority of the districts come to them and that none of them bid the contract. Ken stated the reason for this is that “districts don’t have to bid utilities, insurance and architecture projects.” I believe he is wrong on this. If not why is there a bill in both the House (House Bill 261) and Senate (Senate Bill 48) to remove the need for bidding on these items.

I am not going into details about how all the pricing works at this time. I will do that at a later time if requested. I will however explain how this consortium is setup and a few differences with the IEC.

The IUPC members all pay the same rate no matter what size they are. This does cause some districts to pay more and others to pay less. Ken stated, “Sometimes cost avoidance is more important than cost savings”. The goal over a 12 month period is to beat the utilities cost. They are sometimes successful at this, but not always.

The IUPC negotiates prices with the utility companies. The districts then contract directly with these utilities at the negotiated price meaning no money runs through the IUPC for energy costs. This seperate contract practice protects each districts from others not paying their bills. The IUPC receives fees from the members. They are set as follows:

• Annual fee – $25
• Monthly Fees
  • $30 electricity
  • $25 natural gas
  • $25 waste management

The IUPC handles the monthly nominations (estimate of gas to be used by each district) for the next month and then following up monthly to make sure the balances are correct. All this work prevents the schools from having to learn and do this work themselves.

The IEC reportedly charges $20 per meter. Their fees are also higher charging a 1/4 cent markup for each sponsoring organizations (IASB, IASBO, IASA) for a total markup of 3/4 cent. The IEC targets districts that are entirely electric.

Kensa Corporation is the company owned by the Falkinghams. Kensa just administers the IUPC for the schools. It has some corporate clients, but does not sell energy itself. They will soon be offering services in Wisconsin.

Ken has already notifed the districts that they can cut their gas budget this year by 20% based on their current projections.

I will state here that Ken was very open about their processes and how the IUPC worked. From this conversation, it appears that the IUPC is attempting to save districts money, although they are not always successful. It also is clear that there is a potential for corruption depending on who the administrator is. I believe at this time that Ken and his son Jason are honest hard working people trying to do what is right.

The problem I see with the IUPC is that there is no way of truly determining whether a school district or other taxing body ever saved money with this purchasing arrangement. Each of these districts by bidding contracts may have saved more with that process. Unfortunately, we will never know that answer. The question then becomes how can these taxing bodies change this process going forward. There is only one solution and that is to bid these contracts.