Pulling the plug?|Some NCEMPA members exploring leaving group

Published 3:02 am Sunday, March 7, 2010

By By MIKE VOSS
Contributing Editor

Washington and other eastern North Carolina cities and towns that sell power might be able to withdraw from a power agency that has those cities and town’s power customers paying high electric bills, a power agency lawyer said last month.
Washington Mayor Archie Jennings said Washington is keeping abreast of the movement calling for power-agency members to disconnect from the power agency.
“We’ve been watching it very, very closely,” Jennings said in an interview last week.
Jennings said the relationship between the power agency and its members has reached a “critical juncture.”
“Washington is not the only community that cannot afford to be a member,” he said.
A city or town wanting to leave the North Carolina Eastern Municipal Power Agency faces many challenges, not to mention someone taking over that city or town’s share of $2.6 billion in debt that NCEMPA’s 32 members are obligated to pay, said Michael Colo, the lawyer representing NCEMPA. Colo’s remarks came during the power agency’s Board of Commissioners’ meeting in Wilson, according to the Rocky Mount Telegram.
Colo, in an interview with the Washington Daily News, said the main challenge for a city or town seeking to leave the power agency would be settling the debt issue.
“The biggest issue would be finding another a city to assume their obligation under the contact, or a decision by the city to get out of the distribution business,” Colo said.
Colo discussed several options cities and towns could consider when it comes to leaving the power agency. “None of them are an easy route,” he said. (Those options are discussed in an accompanying article.)
Colo said a municipality — or municipalities — that met several conditions might be able to get out of the contract. That creates a dilemma in that if every NCEMPA member did that, there no longer would be a power agency, Colo told the Daily News. What would be left is the $2.6 billion in debt and some assets, he noted.
The bond agreements prohibit more than 25 percent of NCEMPA members from leaving the agency, he said.
In recent months, power customers in cities and towns such as Washington, Elizabeth City, Rocky Mount and Belhaven have resurrected complaints about high electric bills.
Earlier this month, Elizabeth City Mayor Roger McLean suggested his city buy electricity from another provider and “let ElectriCities sue us,” according to a report in the Daily Advance, a newspaper in Elizabeth City. ElectriCities is the administrative arm of two power agencies, including NCEMPA.
McLean’s “let ElectriCities sue us” comment referred to the possibility of Elizabeth City facing a lawsuit if the city tries to end the city’s contract with NCEMPA. Those contracts, which 32 cities and towns in eastern North Carolina signed in the 1970s, commit those municipalities to repaying a share of the debt incurred as the result of building nuclear power plants owned by NCEMPA. The contracts require those cities and towns to buy their electricity from NCEMPA.
Rich Olson, city manager of Elizabeth City, said he supports his city looking into breaking away from the power agency, according to the Rocky Mount Telegram.
“But I don’t see any of the four options (Colo) suggested as being viable options,” Olson told the newspaper.
At the Wilson meeting, ElectriCities CEO Graham Edwards said municipalities that want to leave NCEMPA could talk with ElectriCities staff about such options.
“We’ll see what we can do to help you do that, he said, the Rocky Mount Telegram reported. “But the bottom line is that if you do that, you have to pay your share of the debt.”
Edwards said that, systemwide, 36 percent of the cost of power paid by NCEMPA members is tied to the $2.6 billion debt on the bonds.
In Washington’s case, about 70 percent of the city’s wholesale electric bill goes toward retiring the city’s share of that debt, according to city officials.
In Washington, about 40 cents for each energy-related dollar paid by a residential customer goes toward retiring the city’s NCEMPA-related debt, Jennings said.
The mayor also was critical of ElectriCities staffers being paid “outrageous” salaries at a time when customers struggle with paying high power bills. Jennings said he has problems with the ElectriCities executive director making a base salary of about $535,000 a year plus incentives that can increase his compensation at a time when some city power customers find it difficult to pay their electric bills.
The decline of the tobacco and textile industries in eastern North Carolina has changed the region’s economy, playing a role in making it difficult for many residents to pay their electric bills. That decline also has affected power-agency members’ finances, Jennings said, adding that their “ability to repay that debt has eroded.”
Jennings said he would like the city to take a two-prong approach when it comes to addressing high electric rates.
First, the city should find ways to provide some “immediate relief” to its power customers who are struggling to pay high electric bills, said Jennings, who said he was speaking for himself and not the City Council.
“We’ve got to do something to help ourselves locally,” he said.
That includes making customers aware of conservation and best-management practices that will help them reduce their power consumption and their electric bills.
Second, the city should work on a long-term solution. Jennings said the city should work with the power agency to rework their contract with each other in a way that provides the city relief from its NCEMPA-related debt or “get out” of the power agency.
“The other side of the coin is this long-term relationship with ElectriCities,” Jennings said.