LMUD ratepayers may have to cough up $3.35 million for a tariff on a $6.7 million Brazilian transformer
Earlier this year, ratepayers of the publicly owned Lassen Municipal Utility District dodged a $2 million bullet when two large transformers crossed the United States/Mexico border when no tariffs were in effect during the Trump administration on-again, off-again, on-again tariff war with most of the nations on earth.
But on Aug. 1 the Trump administration threatens to impose a 50 percent tariff on goods imported from Brazil — including an LMUD’s transformer. If that 50 percent tariff is in place in October when the $6.7 million transformer arrives in the United States, it will cost LMUD ratepayers more than $10 million — an increase of about $3.35 million.
Why such a high tariff?
According to Responsible Statecraft, the Trump administration’s conditions for removing the tariff include “dropping charges against (Brazilian President Luiz Inácio) Lula’s far-right predecessor, Jair Bolsonaro, who faces a possible prison sentence for his role in an alleged conspiracy to undermine the 2022 election (in Brazil) and adopting a more lenient stance towards U.S.-based social media companies operating in Latin America’s largest nation. While Lula’s government has insisted it is willing to negotiate the terms of its bilateral trade relationship with the United States, it regards the first condition as an interference in Brazil’s domestic affairs, violating both its sovereignty and its administration of justice under the 1988 Constitution.”
LMUD discussion
According to LMUD General Manager Nick Dominguez, “Last week we found President Trump sent a letter to Brazil threatening a 50 percent tariff on all Brazilian exports effective Aug. 1. The phase-shifting transformer manufactured by Siemens in Brazil is currently sitting on the dock in Brazil scheduled to be loaded onto a vessel to start making its way to the US so it can be delivered to the Skedaddle Substation in October, like scheduled. That transformer is currently $6.7 million, so a 50 percent tariff on that transformer is an additional $3.35 million hit to the Skedaddle project. A huge impact. We’re continuing to monitor the situation. I reached out to Congressman LaMalfa’s office today — we made connection with his office back in February when we were in D.C. We’re just raising concerns with them. At that time we had grave concerns about the transformers that were in Mexico. We didn’t end up getting hit with the tariffs on those, but we’re raising the concern again with his office. We’re not sure he can do anything for us, but we’re looking for an exemption or something he could do to try and avoid getting hit with this tariff.”
Dominguez said there are warehouses that are exempt from the tariffs, and perhaps the transformer could be stored there and perhaps wait until the tariff is lifted before moving the transformer to Lassen County. But he added storage space is limited and may not even be available for such a large transformer.
Ward 3 Director Jess Urionaguena pointed out this transformer was ordered more than two years ago, long before the tariff was put in place and long before President Trump’s election. He also noted the transformer is not even available in the United States.
Dominguez said all those points were delivered to LaMalfa’s office, and in addition, if the tariff is imposed on the publicly owned utility district, the ratepayers — his constituents — would have to pay the additional cost.
“When we were in Washington, D.C., this was kind of a hot issue for a lot of the smaller utilities,” said LMUD General Counsel Eugene Chittock, “and they were talking then about exemptions, and I know there were some approved back then … I think that’s an avenue that we may have available.”
Dominguez said the amount of the tariff is about 11 percent of LMUD’s annual budget.
Lassen Municipal Utility District President Fred Nagel shares hands with retiring Director Bud Bowden. Wednesday, July 22.Other actions
Actions taken by the LMUD Board of Directors at the July 22 meeting included a proclamation of appreciation for retiring director Bud Bowden and a $44,990 change request from Power Engineer for poles.
The directors met in closed session to discuss existing litigation with William Butler et al and a conference with legal counsel regarding a significant exposure to litigation.
LMUD’s next meeting will be held at 5:30 p.m. Tuesday, Aug. 26.
