Deal delayed: Power-rate cuts expected to come later than sooner

Published 7:19 pm Tuesday, June 30, 2015

Power customers served by Washington, Belhaven and other municipalities likely won’t see expected reductions in their electric rates until later this year, according to one city official who’s familiar with the situation.

In May, the Washington City Council voted for the ordinance consenting to the agreement between Duke Energy Progress and the North Carolina Eastern Municipal Power Agency that should lower power rates in the 32 NCEMPA cities and towns that sell power. The council also approved other documents related to the agreement.

The $1.2 billion agreement would allow Duke Energy Progress to buy stakes in power-generation facilities now owned, in part, by NCEMPA. The Federal Energy Regulatory Commission has approved the agreement. Gov. Pat McCrory signed into law legislation that opened the door for the agreement to move forward.

The new law allows NCEMPA members to sell their physical assets (power plants and the like) and issue bonds to refinance approximately $580 million of debt after this purchase is complete. It also allows NCEMPA power agencies to enter into purchase power agreements to replace the electricity previously provided by the generation assets they are selling.

If all NCEMPA members approve the agreement and it is implemented, electric rates for the members’ power customers are expected to decline, up to 20 percent in some cases.

During the Washington City Council’s June 22 meeting, Councilman Doug Mercer, who represents the council at ElectriCities and NCEMPA functions, provided an update on the issue to the council.

“We had looked forward to the closing of that sale this month. You know I have said several times in our discussions that I thought that was very optimistic schedule, that I felt it would be July or August before we got the paperwork all done and would have sold assets,” Mercer said. “We have moved at a remarkable pace, as was reported several times, and it looked like we were going to make June 30 until (the week of June 15).”

Mercer said part of the delay can be attributed to Duke Energy Progress asking the N.C. Utilities Commission for the commission to conduct a public-comment period that ended Tuesday. The comment period allowed people to express their views on the agreement. The commission’s next meeting is later this month, Mercer said.

“The sale of the assets cannot be completed in June. Hopefully, it will be completed by the end of July. If there is any further delay, it may be into August, but, hopefully, the sale will be completed in July.”

The delay has caused a delay in the refinancing of remaining debt that Washington, Belhaven and other NCEMPA members face, he noted.

“We really won’t know what the debt is until the bonds are sold,” Mercer said. “It could be up or down a little bit from that $580 million number. That number will not be finalized until the bonds are sold.”

Mercer said the city’s existing NCEMPA debt is about $100 million, but that debt is expected to drop to about $30 million, “which is a substantial reduction in what the city will owe.” Mercer also said the wholesale rate the city pays to buy power should decline by about 15 percent. That rate reduction takes effect the month after the sale of assets is completed, he noted.

“We, at that point in time, I feel, should pass part of that rate reduction on to our customers. … There are several reasons for saying part, at that point in time,” Mercer said.

The councilman believes the city should wait until a cost-of-service study (looking at how much it costs the city to provide power to its various types of customers (residential, commercial and industrial) so it has the latest information to consider when deciding what to do with existing rates.

“We really need to wait until that cost-of-service study is completed to make an across-the-board adjustment to our rates,” Mercer said.

Mercer had another thought concerning power rates.

“We need to re-establish our rate-stabilization fund as part of our overall evaluation of what we do with rates,” he said.










About Mike Voss

Mike Voss is the contributing editor at the Washington Daily News. He has a daughter and four grandchildren. Except for nearly six years he worked at the Free Lance-Star in Fredericksburg, Va., in the early to mid-1990s, he has been at the Daily News since April 1986.
Journalism awards:
• Pulitzer Prize for Meritorious Public Service, 1990.
• Society of Professional Journalists: Sigma Delta Chi Award, Bronze Medallion.
• Associated Press Managing Editors’ Public Service Award.
• Investigative Reporters & Editors’ Award.
• North Carolina Press Association, First Place, Public Service Award, 1989.
• North Carolina Press Association, Second Place, Investigative Reporting, 1990.
All those were for the articles he and Betty Gray wrote about the city’s contaminated water system in 1989-1990.
• North Carolina Press Association, First Place, Investigative Reporting, 1991.
• North Carolina Press Association, Third Place, General News Reporting, 2005.
• North Carolina Press Association, Second Place, Lighter Columns, 2006.
Recently learned he will receive another award.
• North Carolina Press Association, First Place, Lighter Columns, 2010.
4. Lectured at or served on seminar panels at journalism schools at UNC-Chapel Hill, University of Maryland, Columbia University, Mary Washington University and Francis Marion University.

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