A potential restructuring of Huntsville Utilities remains in the early discussion phase, but CEO Wes Kelley says the proposal could make the system more efficient as the city continues to grow.

City leaders are currently reviewing a recommendation from the Community Energy Resource Plan, or CERP, which suggests consolidating the utility’s three governing boards into a single entity overseeing electric, water and gas services.

Kelley said the plan stems from a yearlong effort led by a 12-member energy task force formed in 2024 by the mayor, City Council and utility leadership.

“That resulted in the Community Energy Resource Plan,” Kelley said. “It lays out a couple of big priorities that Huntsville Utilities should look at, including demand-side management, grid modernization, local generation and governance.”

The governance recommendation has drawn particular attention, as it would change a structure that has been in place for decades.

A unique structure

Kelley said Huntsville Utilities operates differently than most multi-service utilities.

“There is no one Huntsville Utilities,” Kelley said. “There’s the City of Huntsville electric system, the City of Huntsville waterworks system and the City of Huntsville gas system, and there’s a board of people appointed to each of those.”

While the same individuals have historically served on the gas and water boards, they remain separate legal entities, with a third, distinct board overseeing electric operations.

At the same time, Kelley noted the system functions as a shared operation internally.

“Half of the employees at Huntsville Utilities are joint, meaning they’re paid some from electric, some from water, some from gas,” he said. “But yet we have different boards making decisions regarding a joint entity.”

That structure can create complications in areas like contracting and procurement.

“It’s very awkward because there is no one thing that’s Huntsville Utilities for issuing contracts and doing procurement,” Kelley said.

Why change now

Kelley said Alabama enacted a law allowing for consolidated utility boards decades ago, but Huntsville has never adopted that model.

“The state created a law allowing for consolidated utility boards where you could merge them all into a single board and a single legal entity,” he said. “But for reasons lost to history, Huntsville has never adopted that and we’re asking them to go back and adopt it now.” 

He added that most utilities providing multiple services operate under a single governing board.

“I’m not aware of any other multi service utility, meaning electric, water, gas, sewer, whatever, that doesn’t — is not set up under a single organizing board. We’re the only ones that I’m aware of that are operating the way that we’re operating in the state of Alabama.” Kelley said.

The proposal comes as Huntsville and Madison County continue to see rapid growth, increasing demand on infrastructure and utility services.

“Being able to have all the key decision-makers in the same room at the same time, helping prioritize and deliberate on those issues, would drive more efficiency and help prepare Huntsville for tomorrow,” Kelley said.

Questions remain about rates and oversight

Despite the potential benefits, some members of the Huntsville City Council have raised concerns about how the change could impact oversight, particularly when it comes to utility rates.

Kelley acknowledged those concerns, noting that under state law, a consolidated utility board would have authority to set rates.

“The statute has written that the utility board would set the rates rather than the City Council,” Kelley said. “However, what we need to find is a path that keeps the council involved in the rate-setting process.”

He said several options could be explored, including requiring public hearings or allowing council representation on the board.

“There’s several creative options that we can work with attorneys to come up with the right solution,” Kelley said.

Kelley also pointed to Huntsville’s current rate structure as a strength the city will want to preserve.

“Our rates are among the lowest in the state and nationwide,” he said. “In 2024, residential rates were about 11.5 cents, which put us among the lowest in Alabama and about 40 percent lower than Alabama Power.”

Still in early stages

Kelley emphasized that the proposal is still in the discussion phase, with no immediate action expected.

“We’re just in the dialogue stage,” he said. “What I’m looking for from them at this point is what questions do you have, what legal research can we do and what proposals would you like us to put forward.”

He said a decision could come later this year, depending on how discussions with the council progress.

An opportunity, not a necessity

Kelley framed the proposal as a chance to improve operations rather than a fix for a broken system.

“It is not one of do or die,” Kelley said. “This is not where if we don’t do it, somehow we’re broken. It’s an opportunity to get better and to be better.”

He said the current system has served the community for decades but could be modernized to better reflect how the utility already operates.

“Since the 1950s, Huntsville Utilities has worked as this community’s utility solution provider,” Kelley said. “Getting its governance aligned to a single board making decisions and a single legal entity executing those decisions is more efficient and productive.”

At the same time, Kelley acknowledged the outcome remains uncertain.

“At the end of the day, a decision will be made and we will continue to execute on our mission regardless,” he said. “But this is an opportunity to be more efficient and productive.”