A look back at the history of public power in Eastern North Carolina.
Several dynamics have shaped the energy landscape in NC over the past 120 years, including the demand for electricity, weather-related incidents, costs, and conflicts over energy projects.
New Bern was one of 32 municipalities in North Carolina who jointly owned partial ownership shares in generating units at four power plants owned by an investor-owned utility. In October, we published a historical timeline of significant events, legislation and moments that occurred between 1889 and 1986 to help provide context to what is happening today. Part 2 will detail a historical timeline of significant events that happened between 1987 and 2017.
New Bern’s public power utility
The city’s electric utility is set up to operate like a business by managing revenues and expenses in a separate enterprise fund known as the Electric Fund. The electric utility currently serves 25,837 meters in the city of New Bern, Havelock, Trent Woods, Craven County and Jones County.
The utility has over 80 employees serving in several divisions, including a business office and warehouse that support other city departments. The director of the Department of Public Utilities oversees the department, develops and submits a budget, proposed policies including rate plans and reports to the city manager — the administrative head of the city. The city manager reports to the board of aldermen, who establishes the utility’s policies and procedures, approves the budget and sets rates and riders, etc.
New Bern’s Electric Fund
Over the years, some public officials have said New Bern has one of the lowest tax rates east of Interstate 95, but they don’t talk about the millions of dollars that are transferred from the city’s Electric Fund to the General Fund every year to cover the costs of non-electric-related services and projects as well as payments in lieu of taxes. The city also transfers interdepartmental funds from the Electric Fund to the General Fund for the costs of shared services from the Administration, Finance, Human Resources, Information Technology and other departments.
Historic timeline of significant events, laws and moments
Recap: 1889-1887
The city contracted with New Berne Electric Light and Power Company to illuminate the city in 1889. By 1902, the city owned and operated an Electric Plant. A new plant was built in 1947. The city sold its generating units sometime in the late 1950s or early 1960s and then purchased wholesale power from Carolina Power & Light Co. and sold it to customers at retail.
In the 1960s, New Bern joined other municipalities, co-operatives and others to work on a plan to deliver electricity throughout the state. About twelve years later, New Bern joined 31 other municipalities to form the North Carolina Municipal Power Agency 3. The Board of Aldermen agreed to a deal that would let the Power Agency to borrow $3.2 billion by issuing tax-exempt municipal bonds to purchase ownership shares in CP & L Co.’s seven generating units at four power plants, some were built and others weren’t. In return, the Power Agency members would receive wholesale power at a membership rate, which they resold to customers at a retail rate. The debt plus interest would be repaid by the customers of the Power Agency’s members. NCMPA 3 was later renamed the North Carolina Eastern Municipal Power Agency.
In 1986, New Bern and the other NCEMPA municipalities sent letters supporting the prompt licensing the Shearon Harris Nuclear because “the availability of an adequate supply of electricity is essential to create jobs, promote business development, and ensure the prosperity of the people of New Bern and Craven County,” according to a resolution. The Harris Plant became operational in 1987. Four nuclear-powered generating units were planned at plant, but only one was constructed.
Rates and riders
The North Carolina Utilities Commission regulated the Carolina Power & Light Co., an investor-owned utility, rates and services in the state. The governing boards of the 32 NCEMPA municipal utilities, like the New Bern aldermen, set the city’s electric utility’s rates and riders based on wholesale power costs, costs of operating the city’s electric system, capital costs, repayment of municipal bonds, and other factors.
The city’s retail rate base charge covers all of the expenses to operate the utility including staff, installing/managing the meter, reading the meter, customer service, billing system, maintaining the wires and system’s infrastructure, costs of buildings, payments in lieu of taxes, and other expenses with the exception of power supply costs.
When New Bern agreed to NCEMPA’s purchase of ownership shares in Carolina Power & Light Co.’s power plants, the wholesale rates were established in contracts between CP & L and NCEMPA, and NCEMPA and its members. Each of the Power Agency’s member municipalities appoint a representative to the Power Agency’s Board of Commissioners. The contracts were managed by Electricities of North Carolina.
The wholesale baseline fuel costs included natural gas, nuclear, coal, shipping and handling coal and nuclear waste and other things. At the end of the year, NCEMPA’s Board of Commissioners compared the actual costs of fuel and other expenses to the baseline fuel costs and decided whether the difference would be charged or credited to the Power Agency’s members through a fuel adjustment rider.
The cost of repaying the bonds principal and interest were outlined in the purchase sales agreement, which was a take-or-pay contract.
Stranded debt
It was reported in 1996 that Southport’s city manager said the city joined the power agency when the state “faced unparalleled economic and population growth potential” and needed “to generate additional affordable power.” He said the cities who joined Southport pledged their credit to purchase ownership interest in the power plants in part ownership with CP & L and Duke Energy. In return they received power allocations.
He said two things happened. The fantastic growth predictions failed to materialize, and the member-cities were saddled with ownership in the plants with unused generating capacity. “The cities got the privilege of servicing massive debt for a huge supply of electricity that proved not to be cheaper at all,” he said.
He said under deregulation, the city’s position as a retailer can be challenged by the same companies that the member cities saved in the 1980s. He predicted that if the investor-owned utility companies undermine the city’s retail customer base, the city will be ill-positioned to repay the share of millions of dollars in debt that it assumed with its NCEMPA partners. He felt that if the debt is stranded, it should be repaid by all electricity customers in the state because they all benefited when the cities offered their credit to assure a ready supply of power.
Interfund transfers
Because of their membership in the NCEMPA, New Bern and the other 31 municipalities were allowed to transfer money from the electric fund to the general fund.
“Cities often take revenues from their electric systems and transfer them to the general fund to deliver a higher level of service or to finance capital items on a pay-as-you-go basis, thereby keeping property taxes lower than they otherwise would be higher,” according to Electricities 1996 annual report.
“But bond rating agencies don’t look favorably on this practice, as it may hinder cities when competition comes into play in the future,” the report said.
“If cities want to make payments to the general fund, they should make a payment in lieu of taxes to the general fund that approximates the amount of ad valorem taxes an investor-owned utility would have paid had it provided the electric services,” according to the report. It said, cities should set up a rate stabilization fund “which would allow them to keep rates down in the future.”
“After that is accomplished, they may transfer an amount representing no more than 3 percent of the value of gross fixed assets from the electric fund to the general fund.”
“They should limit the amount transferred to the general fund if the electric fund does not make an adequate profit or does not have a sufficient amount of reserves,” the report said.
Supplemental power
Roughly half of NCEMPA’s electricity came out of its partial ownership of Carolina Power & Light’s power plants. Any other power the agency needed was bought as supplemental power, which becomes more expensive when the load gets closer to peak, according to the Electricities report.
Municipal bonds downgraded
NCEMPA’s municipal bonds were downgraded in October 1996 from an “A” rating to “Baa1” due to high fixed costs and an uncertain future restructuring of the state’s electric industry.
CP & L acquires natural gas company
In 1998, Carolina Power & Light acquired the North Carolina Natural Gas Corporation.
CP & L proposes plan to “buy back” shares
It was reported that Carolina Power & Light proposed a plan to “buy back” shares of the power plants from NCEMPA in 1999.
In November 2000, it was reported that NCEMPA was looking for a new electric power provider to meet its partial requirement needs beginning in 2004. The Power Agency’s load forecast was about 900-950 MW of capacity that would be needed in summer peak months as well as increasing amounts in subsequent years due to load growth.
Improve Air Quality/Electric Utilities
CP & L joined a coalition of public officials, businesses, citizen groups, and organizations in 2000 to support the Improve Air Quality/Electric Utilities legislation.
CP & L merges with Florida Progress Corp., becomes Progress Energy
Carolina Power & Light Co. merged with Florida Progress Corp. in 2000 and rebranded as Progress Energy in 2003. CP&L, a subsidiary of Progress Energy, was renamed Progress Energy Carolinas.
Emissions
The Improve Air Quality/Electric Utilities law was enacted in 2002 which set limits on investor-owned utilities emissions of nitrogen oxide and sulfur dioxide from coal-fired generating units in any calendar year.
2004 Energy consumption
New Bern’s electric utility had 18,169 customers in 2004, according to NCEMPA’s annual report. NCEMPA’s Energy Consumption set a record at 7,185,123 MWh (net of SEPA). The highest monthly Energy Consumption happened in July 2004 at 741,491 MWh.
The Great Recession
The country faced a financial crisis during the Great Recession between late 2007 and mid-2009.
Renewable Energy Portfolio Standard
Legislation was enacted in 2007 that “establishes a Renewable Energy Portfolio Standard for electric power suppliers in the state of North Carolina to supply specified amounts of the electric power provided to their customers in the state from renewable resources,” according to a report by Electricities.
Operating license extended
The Nuclear Regulatory Commission approved Progress Energy’s request in 2008 to extend the operating license for Shearon Harris, which would allow it to operate through October 24, 2046.
Potential plans to add nuclear reactors
It was reported that Progress Energy submitted applications to the U.S. Nuclear Regulatory Commission that outlined potential plans to add two nuclear reactors to its Shearon Harris Plant in 2008. A Progress Energy spokesman said, “We don’t think we’ll be building coal for a really long time, and we don’t think that (natural) gas is the answer either because of the volatility of the price of gas.” Residents of New Hill were concerned about the prospect of adding additional reactors.
Municipal Power Agency raises rates
The North Carolina Eastern Municipal Power Agency raised electric rates by 18 percent between November 2008 to February 2009, and the New Bern aldermen passed the costs onto the city’s electric utility customers.
Coal ash
In December 2008, an earthen dam containing wet coal ash in Tennessee gave way and 1.1 billion gallons of sludge spread across the landscape. It destroyed three houses and covered 300 acres with nine feet of sludge.
Nuclear Plant goes out of service
Progress Energy’s Crystal River Nuclear Station in Florida went out of service in 2009 after cracks were found in the containment structure. Plans to retire the plant were announced four years later.
Plan announced to decommission coal-burning units
Progress Energy Carolinas announced a plan to shut down 11 coal-burning units at 4 sites in NC, including the H.F. Lee Plant, L.V. Sutton Plant and Cape Fear Plant. Two projects were underway to replace the retiring coal-fueled generating capacity with plants fueled by natural gas at the Lee Plant and the Sutton Plant, which were expected to begin operation by 2013.
Supplemental Capacity and Energy
It was reported in 2010 that NCEMPA had a Supplemental Load Agreement with Progress Energy that ran through 2017 which provided additional power when needs exceed the capacity of what the Power Agency owned.
Enterprise funds should be able to stand by itself
A representative from the School of Government advised the New Bern aldermen in January 2011 that the city electric, water and sewer funds are known as the enterprise funds, which are self-sufficient and should be able to cover their expenses. “However, the transfer of enterprise funds to the general fund is leaving the cash in enterprise funds lean. The general fund should be able to stand by itself, according to meeting minutes. He said, “no one on the current board could explain how the percentages were determined for distributing the funds from the enterprise to the general fund.” After a lengthy discussion, “I do not think you are going to run into anything that you are seeing on the graph of how that data might compare with the city’s peers.”
Three aldermen vote for measure to initiate charter change
On a night when the full six-member Board of Aldermen weren’t present, the aldermen voted 3-2 in January 2011 to approve a resolution that asked the NC General Assembly to change the city charter to set term limits, which was later said to be unconstitutional. They also voted to give the mayor the right to vote on all matters versus only voting to break a tie. It’s unclear if the verbiage was part of the resolution, according to meeting minutes.
Nuclear accident
In March 2011, a nuclear accident happened when reactors melted down at Fukushima Daiichi Nuclear Power Plant, causing a hydrogen explosion after a tsunami hit Japan, according to the NRC here. Radioactive contamination spread over a large area and thousands of residents were relocated.
Interfund transfers cause days cash on hand to drop
City Manager Mike Epperson told the aldermen in April 2011 that the audit said the city needed to have a more objective means of identifying transfers for shared charges and set a goal regarding the reasonable percentages, according to meeting minutes. He told the aldermen that the city transferred up to 3 percent of its undepreciated fixed assets out of the enterprise fund to the general fund. Department of Public Utilities Director Jon Rhyne said the days cash on hand drops tremendously when the funds are transferred from the Electric, Water and Sewer Funds. The city manager said the School of Government recommended New Bern’s utilities have approximately two to three months’ worth of days cash on hand. At that time, the utility had less than a month’s worth of operating cash.
New substation
“When the weather is hot or cold and power is lost, the city does not have the redundancy to pick up the load if it is lost during peak periods. This additional substation adds an amount of capacity to our entire system. If a transformer fails at one of the other substations, the city will be able to switch the distribution system and pick up all the customers,” the DPU director said. The aldermen approved a $2,190,000 construction loan at a 4.165 percent fixed interest rate over a 20-year term for a substation (near Havelock), according to minutes. A few months later, it was noted that project came under budget by $278,892.
Minutes say mayor allowed to vote on all matters
“This is the first meeting Mayor Bettis is allowed to vote on all issues versus breaking a tie,” according to June 14, 2011 meeting minutes.
City hires a lobbyist and lawyer to intervene in proposed merger
The aldermen approved a resolution in June 2011 to hire a lobbyist and lawyer to intervene in the proceedings of the proposed merger of Duke Energy Corporation and Carolina Power & Light’s holding company — Progress Energy, Inc.
Interfund transfers strain Electric Fund
Finance Director Keith Fiaschetti said the transfers from the city’s Electric Fund to the General Fund were putting a strain on the Electric Fund in November 2011, according to minutes.
Advance Metering Infrastructure Demand Side Management project
New Bern’s electric utility uses advanced metering devices to transmit two-way radio frequency signals which interrupt the electric flow to certain appliances like water heaters, air conditioners, heat strips, and other things at times of electric peak demand when the utility is charged the most for the purchase of electricity. Customers get a flat rate credit for signing up for the load management program. In 2012, the city read 21,000 electric meters every month through radio and manual reads for the purpose of billing for the services. The city controlled 28,000 appliances at 11,000 residences on a monthly basis through the load management program, according to meeting minutes.
Investor-Owned Utilities merge
Progress Energy and Duke Energy merged, which expanded Duke Energy’s services to Florida in July 2012. This formed the largest electric investor-owned utility in the U.S.
Investor-owned utilities negotiate with NCEMPA
Legislation was introduced in April 2013 that encouraged the North Carolina Eastern Municipal Power Agency to negotiate with Duke Progress Energy to divest their ownership interest in the five generating assets, which was said to reduce electric rates to their business and residential customers. It was reported that the Power Agency owed a little over $2 billion dollars for its share of ownership in the power plants.
Interfund and interdepartmental transfers
New Bern’s Finance director told the aldermen in May 2013 that the “city needed to come into compliance by creating an objective cost allocation model for interdepartmental transfers by next year,” according to meeting minutes. “The transfers represent shared services between departments such as Human Resources, Accounting, and Information Technology,” he said.
“The calculation of the Water and Sewer Fund to the General Fund is based on 1.5% of the gross fixed assets. The Electric Fund interfund transfer to the General Fund calculation is based on 3% of the Electric Fund gross fixed assets,” he said.
He said the legislature was going to limit transfers from the Electric Fund that are greater than 5% and the city had a year to reduce the interfund reimbursements in all three Enterprise Funds.
The city manager said raising rates “is one way to fatten the Enterprise Funds and ward off the LGC (Local Government Commission) and auditors’ scrutiny.” The city could come up with a plan to restructure electric rates in 2014.
Municipal Power Agency raises rates
New Bern’s aldermen were advised that NCEMPA was considering a 3 percent rate increase, but the city could use $1,451,930 from the Rate Stabilization Fund to absorb it, according to meeting minutes.
Interfund transfers
In May 2013, the city transferred 3 percent of the Electric Fund gross fixed assets to the General Fund. In June, the Finance director told the aldermen that the city could transfer money for shared service costs and administrative costs, but the city “wasn’t using an objective measurement process to determine that these costs are reasonably allocable to the utility funds.” He said the city is required to develop a documented cost-allocation plan for implementation to ensure material correctness of individual funds.
Utility funds “should not be subsidizing the general fund”
Finance Director Fiaschetti told the board in February 2014 that the General Assembly “passed laws that will affect the way transfers are handled. Electric fund transfers are capped at the greatest of 3% of gross capital assets of the electric system, or 5% of the gross annual revenues of the electric system.”
The Department of Public Utilities Director Rhyne told the aldermen that “electric utility customers and property taxpayers are not necessarily the same group of people. The city has electrical customers that do not pay property taxes. Therefore electric, water and sewer funds should not be subsidizing the General Fund.”
“Water and sewer financial transfer supports to the General Fund are not a good business practice and all funds including the General Fund should be self-sustaining,” he said. “When and if transfers occur, the water, sewer, and electric funds cash on hand will drop tremendously,” the director said.
Coal ash spills
A pipe under the Dan River Steam Station’s ash basin broke in In February 2014, which sent 39,000 tons of coal ash and 27 million gallons of ash pond water into the Dan River. For years, the power plant burned coal to produce power and the toxic byproduct — coal ash — was put in a man-made body of water called an ash basin. In March 2014, it was reported that power plants were cited for violating water pollution laws.
Electric rate schedule
The aldermen approved a change to the electric rate schedule in June 2014 that would “combat the collection of delinquent bills.” The North Carolina Eastern Municipal Power Agency raised electric rates by 1.8 percent on July 1, 2014.
Duke Energy announces plans to buy NCEMPA’s ownership in power plants
Duke Energy Progress announced in July 2014 that they planned to buy the Municipal Power Agency’s ownership interest in Brunswick Nuclear Plant Units 1 and 2 in Brunswick County, the coal-fired Mayo Plant in Person County, the Roxboro Steam Plant Unit 4 in Person County and the Shearon Harris Nuclear Plant in Wake County for $1.2 billion. As part of the agreement, DEP and NCEMPA would enter into a 30-year agreement to continue serving the NCEMPA customers that were getting power from the plants.
Coal Ash Management Act
Two months later, the Coal Ash Management Act was enacted that required all electric generating facilities in the state “to convert to the ‘dry’ disposal method for: fly ash by Dec. 31, 2018, and bottom ash by Dec. 31, 2019, or in either case, if not, the facility shall be retired,” as noted here.
Electric utility bills
The aldermen approved changes to the electric utility deposit policy “as a phase-in-phase out approach” in May 2014, according to meeting minutes. “Customers who are now required to pay a deposit have up to 10 months to pay, and the deposits are refunded after 18 months of excellent payment history. Customers facing financial hardship my request help from other agencies.” The BOA approved a motion to increase the payment due date from 15 to 20 days to “provide some consistency for the customers until the city goes on-line with Advance Metering System.”
Lewis Farm Electric Substation project
The aldermen approved the establishment of an Electric Substation (Lewis Farm) Project in the amount of $2,190,000 to accommodate an increasing load due to growth in Township 7” in September 2014, according to meeting minutes. It was later reported that the project came in $278,892 under budget.
Load management program
In November, the aldermen approved changes to the customer service policy to provide a reduced residential deposit as part of the load management program.
Municipal revenue bonds
Mark Stephens, the new city manager, told the aldermen in November 2014 that he hoped the city could increase the bond rating so they could quality for general obligation bonds. The board adopted municipal revenue bond orders to borrow $3.9 million for the AMI/DSM project and the Kale Road Project bond for a 10-year term at an interest rate of 2.15 percent rate.
Operations relocate to property in Ward 3
The Department of Public Utilities were working to relocate operations from First Street – the site of the city’s old Electric Plant — to a property near Old Airport Road. “Significant improvements (site grading, construction of equipment storage shelters, stormwater pond modifications and parking driveway paving)” were needed, according to minutes. The lowest bid was estimated at $1,346,092.
Reductions in staff
The aldermen approved a transfer of funds from the city’s Water Fund’s fund balance as a residual equity transfer with $8,427 will be transferred to each of the following funds: General Fund, Electric Fund and Sewer Fund in May 2015. Stephens said the budget team and city staff reduced their budget by 5%.
A citizen noted that the budget was decreased by about $6 million, “but the deficit could possibly continue if the transfers are not allowed by law.”
In September 2014, several aldermen wanted to allow the city manager to have the opportunity to report on the possibilities of implementing the reduction, and they wanted to hear from the director of Finance and the city manager as to where the city is financially, according to November meeting minutes.
The city manager said his goal was to receive guidance from the board so staff can develop a budget for the upcoming year.
The Public Utilities director said the Electric Fund had “extremely high percentages” of debt and costs for purchasing power, which left a very small portion of the budget for operating expenses, salaries and benefits. He said he could produce about $600,000 in cutbacks to help with the reduction, which equated to a 1 percent reduction in the utility rate.
The city manager said he was hopeful that the city would increase the bond rating so it could qualify for general obligation bonds. He said, “If you reduce rates which effects revenue and don’t offset the expenditures then that negatively impacts the middle ratio which can trip the revenue bond. If you trip a revenue bond covenant a third party administrator would likely become involved to evaluate the city system and then set the utility rates at that time the Board of Aldermen would lose all control to set the utility rates.”
The DPU director said the Electric Department’s personnel and operating expenses could be reduced by $608,483, which equated to a 1 percent reduction in the utility rate.
The finance director said when they “consider removing interfund transfers as part of a rate reduction, revenue goes down but expenses don’t.”
Staff reported that the electric, water and sewer rates could be reduced by 3 percent effective July 1, 2015. The city manager said the reductions were due to the hiring freeze.
The city manager said it was “important to keep an even keel on the utility rates.” He said they couldn’t predict the outcome of the asset sale (between Duke Energy Progress) or how much the utility rates would go down as far as the power supply costs.
Fiaschetti said local governments in the state can’t have lines of credit or capital loans, so they have to rely on reserves in NC. He said the city needed to develop a minimum days cash on hand policy for each of the enterprise funds (electric, water, stormwater and sewer) because they would not want to hold excess cash over the reserve level thresholds. He said having a policy “would help maintain stable rates for customers because it allows the utilities to draw from the reserves should an unexpected event occur rather than the need for a sudden rate increase.” He said the policy would be a major steppingstone to obtaining general obligation bonds because it improves the city’s credit profile.
He said it was very critical when considering a reduction in rates that they carefully consider where they take the money from. If they reduce rates, which affects revenue, and don’t offset the expenditure then it could trip the revenue bond.
He said the Electric Fund’s minimum days cash-on-hand was 79 and the city was at 80. The Finance director said when the city gets above 90 days cash on hand in the Electric Fund, the excess money would go into a rate stabilization fund.
Alderman Jeffrey Odham asked if money could be transferred in between funds — if an excess in the days cash on hand for water, it can be transferred to sewer if that falls short.
The Finance director said it wasn’t “a good business practice and it is frowned upon.”
Monies transferred from Water Fund to Electric Fund
Two weeks later, City Manager Stephens told the aldermen that they approved a $265,100 contribution from the Water Fund for the AMI project and a $40,900 contribution from the Water Fund for the Kale Road project on Nov. 12, 2014, according to meeting minutes. There was no mention of the conversation or vote in the Nov. 12 meeting minutes.
Mayor Dana Outlaw asked the city manager if the Water Fund was involved in the AMI project because of meter reading. Stephens said the AMI system was for water and electric meters which could be read from a portable unit. The information will be submitted electronically to a hub, and it will eventually be submitted to the Kale Road facility. The aldermen approved a budget amendment that authorized $306,000 to be transferred from the Water Capital Reserve Fund to the Electric Fund for the AMI/DSM System Project and Kale Road Project Fund, which was said to reduce the amounts to be financed. Alderman Dallas Blackiston, Victor Taylor, Pat Schaible, Johnnie Ray Kinsey, Bernard White and Jeffrey Odham voted for the motion. The mayor also voted for the motion. That night, the board met in a closed session to discuss a personnel issue.
Finance director resigns
The director of Finance resigned a week later.
Round up program
In December, the board approved the New Bern CONNECTS Round Up Program where utility customers can round up payments or donate money for residential customers who need assistance with paying their utility bill. The city planned on partnering with Religious Community Services to distribute the funds to customers who meet the requirements established by RCS for assistance.
Rate Stabilization Fund
The aldermen approved an operating cash reserve policy for the electric utility at 90 days cash-on-hand “due to the age of the electric system and its exposure to natural disasters.” The DPU director said the policy dictates that anything about the 90 days cash on hand goes into the Rate Stabilization Fund, which will be critical after NCEMPA sells the assets.
Water Fund budget amendment corrected
The Board of Aldermen corrected the budget amendment for the transfer of funds for the Kale Road and AMI/DSM projects in January 2015. The amendment should have requested a reduction in the amount of $277,500, not $306,000. It also should have included an increase to Fund Balance Appropriated in the amount of $28,500, according to minutes.
City cuts staff positions to reduce electric rates
Legislation was passed in April 2015 that provided a means for Duke Energy Progress to finance the cost of buying NCEMPA’s generating assets and the Municipal Power Agency received legislative approval to refinance the remaining debt. A few weeks later, the aldermen approved a budget that cut positions through attrition and freezing vacant positions, this resulted in a 3 percent reduction in electric rates.
“Trading a really bad deal for a ‘less’ bad deal”
The director of Public Utilities told the Board of Aldermen that NCEMPA would be “trading a really bad deal for a ‘less’ bad deal; the current liability will be traded for what is essentially a diluted liability. There is no recourse through the Federal Energy Regulatory Commission once the agreement is signed. This is a contract; FERC and NC Utilities will not regulate the contract. If one party breaches, the recourse is for the other party to initiate a lawsuit. FERC will not step in on a contractual matter,” according to closed session meeting minutes.
Surge in utility bills due to weather
The DPU director said in April that any surge in the utility bills would be due to the cold weather in January and February that resulted in increase in Kilowatt usage.
City reduces retail rates
In anticipation of the sale of ownership shares in power plants to Duke Energy Progress, the board voted in June 2015 on a motion to approve a rate plan that would reduce retail rates by 12 percent, with a retail rate increase of 1.2 percent required as of April 1, 2016, to overcome 2.6 percent power supply increase with aldermen Dallas Blackiston (Ward 1), Johnnie Ray Kinsey (Ward 4), Bernard White (Ward 5), Jeffrey Odham (Ward 6) voting for it and aldermen Victor Taylor (Ward 2) and Pat Schaible (Ward 3) voted against it. Mayor Dana Outlaw (of Ward 6) voted for the motion.
NCEMPA sells ownership shares in power plants to Duke Energy Progress
In July 2015, the North Carolina Eastern Municipal Power Agency sold its partial ownership shares in about 700 megawatts of generating capacity in four power plants to Duke Energy for $1.25 billion. Prior to the sale, NCEMPA owed $1,721,650,000 in debt. Numerous reports said the total debt (principal and interest) peaked at over $6 billion.
New Bern’s remaining debt was at $33 million, known as stranded costs, was refinanced with revenue bonds that would be paid back by the electric utility’s customers over the next ten years.
NCEMPA’s members continued to own their electric distribution systems and no longer received electricity through its ownership shares in the plants, instead, they’ll receive power through a 30-year wholesale “full requirement” power purchase agreement between NCEMPA and DEP, according to agency documents. In conjunction with the sale, NCEMPA’s new rate schedule “resulted in an average wholesale power cost reduction of approximately 17 percent.” Riders were also adjusted, as noted here.
The ownership of spent nuclear fuel was transferred to Duke Energy Progress. “Litigation was pending against the Department of Energy for reimbursement of costs associated with the storage of nuclear fuel at the nuclear plants as a result of DOE not providing a repository for spent nuclear fuel,” according to the report. The provisions in the contract “allow NCEMPA to recover their allocation of these costs during the time period that NCEMPA was a joint owner in the Brunswick and Harris Nuclear Plants.”
The aldermen also approved a transfer of $1,276,679 from the Electric Fund to the Rate Stabilization Fund.
General obligation bonds
The aldermen talked about issuing general obligation bonds to pay for capital projects in December 2015. The principal and interest would be repaid by property owners over several years. Alderman Odham said the city’s ad valorem tax rate was 41 cents per $100 in valuation. With the reevaluation (of property in Craven County) New Bern’s tax rate was expected to increase to 45 cents in order to remain revenue neutral. He “suggested that the tax rate not exceed 50 cents,” according to meeting minutes.
In January 2016, he made a motion to table the decision to adopt an ordinance to establish a general obligation capital projects fund for sidewalk improvements, a fire station and recreation facilities because additional feedback was needed and they may be able to fund some of the projects, according to minutes.
AMI/DSM project
The aldermen approved changes to the capital project ordinance for the AMI/DSM project fund in January 2016 that added $5,600,000. The total cost of the project was said to be $9,050,000, according to meeting minutes. The project was later financed with revenue bonds.
Fund transfers for NCEMPA members
In February 2016, the city manager told the board that NCEMPA was predicting rates would increase by 3 percent in 2020, according to meeting minutes.
Duke Energy acquires Piedmont Natural Gas
Duke Energy announced in October 2016 that they acquired Piedmont Natural Gas. Piedmont will retain its name and operate as a business unit of Duke Energy.
New Bern reduces electric rates
The aldermen approved a 1.25 percent reduction in electric rates in 2016.
In 2017, NCEMPA implemented a 4.5 percent rate reduction, and the city reduced rates by 1.50 percent.
Stay tuned for Part 3.
By Wendy Card, Editor. Send an email with questions or comments.