On June 24, 2022, the Butte County Grand Jury (BCGJ) released its Annual Report 2021-2022 to the public. An 11-page portion of the BCGJ report focuses on the City of Gridley and is titled, “City of Gridley Electric Utility Turns a Profit.”

According to the summary section of the BCGJ report, “The City of Gridley has been furnishing residents with electricity since 1910. As a Publicly Owned Utility (POU), the Gridley Electric Utility (GEU) is not-for-profit and operates under different rules than other electric utilities in the state. The GEU rates are governed by the California Constitution and California law and must reflect cost-of-service1 . In addition to oversight by local officials, POUs coordinate with the California Public Utilities Commission (CPUC) on energy planning issues and report to the California Air Resources Board (CARB) and the California Energy Commission (CEC). The rates are set by the Gridley City Council at public meetings.

Local officials and staff have been unable to provide requested documentation on how the current rates were computed. There is a lack of transparency over the computation and justification for the electric rates.

Every year over one million dollars is transferred from the GEU Enterprise Fund into the City of Gridley General Fund. These transfers have over time contributed to an accumulation of cash and cash equivalents on the balance sheet of over 17 million dollars as reflected in the 2019 Audited Financial Statement.

The Butte County Grand Jury (BCGJ) investigation found that the audits the city had posted were not current. The audit posted on their website at the beginning of the investigation was for the fiscal year (FY) ended 6-30-18. When the BCGJ notified the City Administrator's office that the website did not have the most current financial statement posted, the website was quickly updated, with a posting of the FY 2019 financials. However, the FY 20 and FY 21 financials are still being audited by the city's CPA firm. The city staff has indicated that the audited financials for FY 20 and FY 21 are still pending; a situation that is not in compliance with good governance or established financial protocols.

California State Code 25250 and 25253 requires Comprehensive Annual Financial Report (CAFR) be completed within 6 months of the close of the fiscal year.”

The report continues to provide a glossary of terms, background, methodology, documents and websites referenced, definitions of terms, a discussion portion with tables and graphs for reference, and finally, it’s findings and recommendations.

The BDGJ report lists 6 findings, outlined below:

F1. The City of Gridley has not posted its audited financial reports dated 6-30-20 and 6-30-21.

F2. A portion of the funds in excess of the Electric Enterprise Operating Expenses are transferred annually into the City of Gridley General Fund.

F3. The City of Gridley audits show an accumulation of cash over the Fiscal Years 2016-2019.

F4. City officials have not identified the goal number of accumulated cash/investments.

F5. The City of Gridley has not provided the method or basis for the computation of the GEU rates.

F6: The GEU rates per kWh are comparable to other northern California cities.

The BCGJ Recommendations listed on the BCGJ report are:

R1. City of Gridley to produce audited and approved financial reports for FYs ending 6/30/20 and 6/30/21 by 9/30/22.

R2. City of Gridley to produce audited and approved financial reports no later than 6 months after the close of each fiscal year starting with the audit dated 6/30/22.

R3. City of Gridley to provide a detailed plan for the allocation of unrestricted cash/investment accumulations in the cash and investment fund accounts. The plan shall itemize to which category(ies) the accumulation is allocated by 12/31/22.

R4. City of Gridley City Council and Gridley City Administrators to make public the basis and methodology for calculating the electric rates in a clear, understandable manner by 12/21/22.

The BCGJ Report requires responses to items F1-F6 and R1-R4 pursuant to Penal Code sections 933 and 933.05 from the Gridley City Council within 90 days. The BCGJ Report invites responses to the same items, F1-F6 and R1-R4, from the Gridley City Administrator and Gridley Finance Director within 60 days.

To read the full report, please visit the Butte County Grand Jury’s (BCGJ) website at: https://www.butte.courts.ca.gov/sites/default/files/butte/default/2022-06/2021-2022_Grand_Jury_Final_Report.pdf. The section focusing on the City of Gridley begins on page 65 and is titled, “City of Gridley Electric Utility Turns a Profit.”