NCEMPA Meeting End Results - S.O.S

The NCEMPA Meeting held yesterday at the Wilson Operations Center yielded pretty much the same rhetoric members of city council and the mayor keep saying. The Same Ole Stuff! Shi'diggity! Stink! etc.,

Power Agency Presents Options for Member Cities to Withdraw

By John Henderson
Rocky Mount Telegram

Wednesday, February 24, 2010

WILSON — Rocky Mount and other Eastern North Carolina cities might be able to leave a power agency whose bond agreements are saddling residents with high utility bills, a lawyer representing the power agency informed elected officials Wednesday.

But a city that wants to leave the N.C. Eastern Municipal Power Agency would face numerous hurdles, and someone would have to assume the city’s share of the debt, said Michael Colo, a Poyner Spruill lawyer representing the power agency. Speaking to officials from 32 cities at the power agency’s Board of Commissioners meeting, Colo outlined various steps a city possibly could take to part ways with the agency.

Eizabeth City Mayor Roger McLean recently called for his city and others like it to break ties with the power agency, which is the wholesale electric provider. Several Rocky Mount residents spoke out at the meeting at the Wilson Operations Center about how high utility bills are causing severe hardships.

Colo said a city that meets several conditions might be able to get out of the agreement.
“But the dilemma that you and we face is that if every city wanted to do that, we’d no longer have an agency, and we’d have $2.6 billion worth of debt and some assets,” Colo said.

Colo said one approach is for the entire power agency to sell off its assets. But cities would then have to pay the difference between the sales price of the power agency’s assets and the $2.6 billion in bond debt that helped finance power plants. He said the only logical buyer is Progress Energy.

"I’m not sure they are in a position today where they are looking to spend a considerable amount of money for new assets,” he said. If a city wanted to get out of the power agency, another city could assume its rights and obligations but also would have to assume the debt, Colo said.

The bond agreements prohibit more than 25 percent of the participants in the power agency from leaving.
In another scenario, a city could merge its electric system with another city’s system. “But the city that wants out is still obligated under its contract to pay its (bond) obligations. These obligations don’t go away,” he said.

Another alternative that is probably not practical is for a city to fade away, Colo said. “The city or town would disappear as a unit of local government,” he said. He said the Local Government Commission would have to approve this.

“I’m not even sure there is a statutory procedure in North Carolina to do that, so I think it would have to be done by an act of the legislature,” he said. Another potential option is for a city to assign its rights and obligations under the contracts to another agency, be it a private corporation or an investor-owned utility.
“There are a lot of tax considerations that must be reviewed (with that option),” Colo said.

ElectriCities CEO Graham Edwards said cities that want to leave the agency could talk with ElectriCities staff about these options. “We’ll see what we can do to help you do that,” he said. “But the bottom line is that if you do that, you have to pay your share of the debt.”

Tarboro Town Manager Sam Noble said it is not feasible for a city to get out of the power agency, noting that cities have been paying off the power agency’s bond debt for 28 years. “Rest assured, if a city could have gotten out of the agency in the last 28 years, someone would have gotten out,” he said.

Rocky Mount needs to explore if it is feasible to break from the power agency, Rocky Mount Councilman Andre Knight said after the meeting. Knight lauded Edwards for informing city officials that cities might be able to get out of the agreement. “That was the first time I had heard that,” he said.

Knight said he would like the issue to be discussed at a council Committee of the Whole meeting.
He said if it is determined that it is not feasible for Rocky Mount to leave the agency, then the focus can be shifted to other ways to reduce electric bills, such as weatherization of homes, improving substandard housing or eliminating the city’s transfer of electric funds to the general fund.

Elizabeth City Manager Rich Olson said he supported that city investigating breaking away from the power agency. “But I don’t see any of the four options (Colo) suggested as being viable options,” Olson said.

Edwards said the power agency entered into the bond agreements that funded the power plants in good faith years ago. He said ElectriCities staff has looked at many options to reduce electric bills, including refinancing.
But he said it is not likely rates will be going down any time soon. He said 36 percent of the cost of power is tied to the $2.6 billion in debt on the bonds.

“We can’t do a thing about that unless we were to default on our bonds,” he said. “We can’t do that. We have a credit rating that is an A minus ... The state of North Carolina, I don’t think, would want us to default on our bonds. I know the Local Government Commission would not.”

Edwards said he empathizes with customers, whose bills have been higher than normal recently due to an unusually cold winter. “We cannot reduce the rate at this point in time,” he said.

He said ElectriCities can help cities learn more about energy efficiency measures that can be passed on to customers such as energy audits and weatherization of homes. “We can’t reduce the rate, but we can help out with consumption,” he said.