Electricities Background Presentation


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Background Presentation on Electricities shared at Summer 2013 NCLGBA Conference (July 11, 2013)

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Electricities Background Presentation

  1. 1. ElectriCities, NCEMPA & NCMPA1 Background July 2013 Summer 2013 NCLGBA Conference
  2. 2. History: Why ElectriCities Was Formed Governance Business Current Issues The Value of Public Power Questions Agenda 2
  3. 3. A Look Back at History 3  With energy demand outpacing supply, utilities couldn‟t guarantee reliable long-term power supply – Rationing of power predicted – Electric costs steadily increasing  Cities feared negative impact on economic development The Impact of the 1970s Energy Crisis: Poor Reliability, Rising Costs Created Dire Situation
  4. 4. “For the first time in modern North Carolina, you‟re seeing the two largest power companies in the state not being able to say to an industrial prospect, „Yes, come any time you want and anywhere you want, and we‟ll have power for you.‟” Sherwood Smith, Chairman and CEO, CP&L October 1981 Business North Carolina A Look Back at History 4
  5. 5. “We were not able in 1974 to sell any bonds at any price, under any conditions whatsoever. We were desperate for cash to meet the payroll... We converted everything we could to cash. We converted uranium to cash. We sold our office buildings and leased them back.” Bill Lee, Chairman and CEO, Duke Power Company July 9, 1985 Testimony in Rate Hearing A Look Back at History 5
  6. 6. The Impact of the 1970s Energy Crisis: Rising Costs  Wholesale rates were volatile and unpredictable  Energy rates skyrocketed across the U.S.  From 1970 to 1979 – CP&L wholesale rates increased 243% – Duke wholesale rates increased 262% A Look Back at History 6
  7. 7. Energy Crisis Brought Together Utilities and Cities  Cities wanted greater reliability and control over costs  Utilities needed help to finance new power plants The Best Solution At The Time: Cities Granted Permission to Own Generation  Legislation passed unanimously in 1975  Constitutional Amendment passed in 1977  NCMPA1 purchased ownership in Catawba in 1978  NCEMPA purchased ownership in 5 CP&L plants in 1982 Who Supported the Idea?  Governor, Legislators, City Officials, Voters The Power Agency is Formed 7
  8. 8. Three Mile Island Changed Everything 8 March 28, 1979
  9. 9. Increased government regulations Construction delays Significant cost overruns Cost of NCMPA1 Share of Catawba * Source: NCMPA1 “Summary of Events Affecting Current and Projected Power Costs and Responses Thereto” (July 5, 1988); original cost projected to be $0.5 billion. The Catawba Nuclear Plant Faced: Three Mile Island Changed Everything 9
  10. 10. 10 Cost to build Catawba was almost three times higher than projected NCMPA1 was left with high debt, made worse by record high interest rates and a decline in projected load growth NCMPA1 is legally bound to repay the bonds; no cancellation opportunities The Impact on NCMPA1: Three Mile Island Changed Everything
  11. 11.  Increased government regulations  Construction delays  Significant cost overruns  Plans for 3 additional units cancelled Cost of NCEMPA Share of Shearon Harris  * $3.6B includes construction cost, fuel, interest during construction, deferred cost and cancellation cost. Original cost estimate: $1.4B.  Sources: Research Triangle Institute “Policy Options for North Carolina’s Municipal Power Agencies” (March 1999) and ElectriCities “Report to the Study Commission on the Future of Electric Service in North Carolina” (October 1999). The Shearon Harris Nuclear Plant Faced: Three Mile Island Changed Everything 11
  12. 12. 10 • The cost to build the Shearon Harris plant* was more than twice as expensive as projected • NCEMPA was left with high debt, made worse by record-high interest rates and a decline in projected load growth • NCEMPA is legally bound to repay the bonds; no cancellation opportunities * Cost per kilowatt The Impact on NCEMPA: Three Mile Island Changed Everything
  13. 13. Catawba Nuclear Station 13  The Catawba plant, which consists of two identical units, is jointly owned by NCMPA1, Duke, Piedmont Municipal Power Agency (S.C.) and North Carolina Electric Membership Corporation  NCMPA1 owns 75% of Catawba Unit 2  Through contractual arrangements, the owners share both units at the plant  NCMPA1 owns the largest share of the Catawba Plant – NCMPA1 37.500% – NCEMC 30.754% – Duke 19.246% – PMPA 12.500% Nuclear Regulatory Commission issued license extensions December 5, 2003 for both Catawba and McGuire Nuclear Plants License Expiration Catawba 1 12/5/43 Catawba 2 12/5/43 McGuire 1 6/12/41 McGuire 2 3/3/43
  14. 14. 14 NCEMPA Jointly Owned Units Mayo Plant 16.17% Ownership (117.6 MW) Roxboro Unit 4 12.94% Ownership (90.3 MW) Brunswick Plant 18.33% Ownership (342.7 MW) U1 License Expires: 9/8/2036 U2 License Expires: 12/27/2034 Harris Plant 16.17% Ownership (150.0 MW) License Expires: 10/24/2046
  15. 15. History Governance: How ElectriCities Operates Business Current Issues The Value of Public Power Questions Agenda 15
  16. 16. Governance Structure 16 NCMPA1 Board of Commissioners Primary Responsibilities  Accepts/rejects wholesale rates  Adopts NCMPA1 budgets  Concurrence with debt issuance ElectriCities Staff Primary Responsibilities  Provides management services to the Power Agencies  Provides other joint municipal assistance services to 86 cities in NC, SC and VA ElectriCities Board of Directors Primary Responsibilities  Sets policy and strategic direction  Holds management accountable for day-to- day operations of the Power Agencies  Reviews and approves ElectriCities budget  Adopts wholesale rates sufficient to cover Power Agencies’ debt and expenses subject to rejection by the Board of Commissioners Trade Organization GovernmentRelations Member Services Safety & Training Economic Development NCEMPA Board of Commissioners Primary Responsibilities • Accepts/rejects wholesale rates • Adopts NCEMPA budgets • Concurrence with debt issuance
  17. 17. 17 Monroe Donald D. Mitchell Greg Demko Freddie B. Gordon Morganton Dan Brown Brooks Kirby Sally W. Sandy Newton Todd Clark Wayne Dellinger Douglas S. Wesson Pineville Mayor George Fowler Vacant Shelby Mayor O. Stanhope Anthony, III J. Richard Howell, Jr. Brad R. Cornwell Statesville Mayor Constantine H. Kutteh F. Kent Houpe Larry Pressley Mayor Constantine H. Kutteh Secretary-Treasurer Statesville Albemarle Raymond I. Allen Jack F. Neel Bostic Vacant Vacant Cherryville Mayor Bob Austell Brian Dalton Cornelius Chuck Travis David Gilroy Drexel Sherri Bradshaw Carroll Franklin Gastonia Porter L. McAteer Jim Gallagher Paul Jakubczak Granite Falls Mayor Barry C. Hayes Jerry T. Church Frank Mackie High Point Strib Boynton Mayor Bernita Sims J. William McGuinn, Jr. Huntersville Gregory H. Ferguson Sarah McAulay Landis W. Steve Rowland D. Reed Linn Lexington John T. Walser, Jr. Mayor Newell Clark L. Wayne Alley Lincolnton Stephen H. Peeler Mayor John O. Gilleland, Jr. Jeff B. Emory Maiden Billy R. Price Marcus C. Midgett NCMPA1 Commissioners and Alternate Commissioners; Alternate Commissioners' names appear in italics. (as of 1/29/13) NCMPA1 Board of Commissioners Appointed by Local Governing Board NCMPA1 Officers Jack F. Neel Chairman Albemarle Mayor Barry C. Hayes Vice Chairman Granite Falls
  18. 18. 18 Kinston Vacant Tony Sears Rhonda F. Barwick La Grange John P. Craft Larry Gladney Bobby Wooten Laurinburg Harold W. Haywood Curtis B. Leak Louisburg Ray Patterson Tony L. King Mark R. Warren Lumberton Harry L. Ivey Leon Maynor T. Wayne Horne New Bern Jonathan Rynne Dennis K. Bucher Mayor Lee W. Bettis, Jr. Donald I. Evans Secretary-Treasurer, Wilson Apex Bruce A. Radford J. Michael Wilson R. Lee Smiley Ayden Adam G. Mitchell Mayor Stephen W. Tripp Belhaven Mayor Adam W. O’Neal Dr. Guinn Leverett Benson Matthew R. Zapp Braston A. Newton Clayton Robert J. Ahlert Mayor Jody L. McLeod Edenton Anne-Marie Knighton Willis Privott Glenn Andersen Elizabeth City Richard Olson Mayor Joseph Peel Farmville Richard N. Hicks David P. Hodgkins Brian Shackleford Fremont Leon V. Mooring Kerry McDuffie Harold Cuddington Greenville Utilities Comm. Virginia D. Hardy, PhD John F. Minges, III Anthony C. (Tony) Cannon Hamilton Herbert L. Everett Mayor Donald G. Matthews, III Hertford Brandon Shoaf Mayor Horace C. Reid, Jr. Hobgood Vacant Danny Ellis Hookerton Mayor Robert E. Taylor April H. Baker Danny Taylor NCEMPA Commissioners and Alternate Commissioners; Alternate Commissioners' names appear in italics. NCEMPA Officers Mayor Vivian A. Jones Chair, Wake Forest Matthew R. Zapp Vice Chair, Benson Pikeville Lyman G. Galloway Robert Hooks Kathie P. Fields Red Springs Mayor John M. McNeill David Shook Edward Henderson Robersonville Elizabeth W. Jenkins Stacy Scott John David Jenkins Rocky Mount Andre D. Knight Charles W. Penny Richard H. Worsinger Scotland Neck Mayor Leonard Bunting Nancy Jackson Selma Richard Douglas Donald Baker Mayor Cheryl L. Oliver Smithfield Paul Sabiston C. Earl Botkin Southport Paul D. Fisher James F. (Jim) Powell Tarboro Rick Page Alan Thornton Robert L. (Buddy) Harrison Wake Forest Mayor Vivian A. Jones Mark S. Williams Washington Doug Mercer Keith Hardt Josh Kay Wilson Donald I. Evans Dathan C. Shows Grant W. Goings NCEMPA Board of Commissioners Appointed by Local Governing Board (as of March 2013)
  19. 19. History Governance Business Current Issues The Value of Public Power Questions Agenda 19
  20. 20. NCMPA1 Power Supply 20 Electricity Supply Project Sales Agreement • Catawba Nuclear Unit 1 & 2 • McGuire Nuclear Unit 1 & 2 (exchange) ~ 96% ~ 4% Supplemental Power Supply Electricity Sales Sales to Member Cities ~ 75% ~ 25%Sales to Utilities (Surplus Sales)
  21. 21. NCMPA1 – 2013 Budget Revenues 21 2013 Budget $564M Sales to Participants, $420 .4M, 74.5% Sales to Utilities, $52M, 9.2 % McGuire Exchange Entitlement, $42.1 M, 7.5% Excess R&C Fund Valuation/Other Income, $19.2M, 3. 4% Investment Income, $7.9M, 1.4 % Fund Equity Withdrawal/ (Deposit), $22.5M, 4 .0%
  22. 22. 22 NCMPA1 – 2013 Budget Expenses 2013 Budget $564M Power Agency Services Details Management Services $ 10.1 (1.8% of total budget) Outside Consultants $ 1.4 (0.2% of total budget) Other PAS $ 3.2 (0.6% of total budget) Total $14.7 M O&M , $110.0M, 19.5 % Fuel , $66.1M, 11.7 % McGuire Exchange Entitlement, $ 39.1M, 6.9% Purchased Power & Transmission, $40.4M, 7.2% Duke/Catawba A&G, $37.0M, 6.6% Power Agency Services, $14. 7M, 2.6% Taxes, $37.9M , 6.7% Debt Service, $192.6 M, 34.1% R&C Fund, $19.2M, 3.4% Decommissioning Fund, $7.4M, 1.3%
  23. 23. $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Historical Projected $154M Capital Additions (2012 - 2014) $121M Forecasted Capital Additions (2015 - 2017) $Millions Catawba Retirement $1.3B reduction since high in 1993 Outstanding Debt January 2013 = $1,433,090,000 Weighted Average Interest Cost = 3.36% Outstanding Principal by Year Historical and Projected 23
  24. 24. Wholesale Rate Plan 24 * All increases shown are assumed effective July 1 of each year. Year Projected NCMPA1 Increase* 2013 5.0% 2014 5.0% 2015 5.0% 2016 2.5% 2017 - - 2018 - - 2019 - - * Duke values are projected by NCMPA1 *
  25. 25. Regional Electric Rate Increases 25 33.77% 36.77% 38.67% 50.83% 51.37% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% PercentageIncrease Cumulative 10 Year Electric Rate Increases 2004-2013* NCMPA1 Wholesale NCEMPA Wholesale Duke Retail Progress Retail Dominion Retail * 2013 increases filed pending approval for Duke and Progress
  26. 26. AR Rate Levels – Projections Since 2007 26
  27. 27. Comparing 2007 Rate Plan to 2012 Rate Plan Summary of Higher Costs & Revenue Loss 27
  28. 28.  Cost reviews/audits of contracts and bills  Debt restructuring  Refunding debt to lower interest rate  New Capital Additions financing  Seek opportunities to maximize off-system sales revenues  Internal cost controls 28 What Are We Doing About Costs And Rates?
  29. 29. NCEMPA Power Supply 29 Sources of Electricity (2012 Energy) NCEMPA’s ownership of jointly-owned units Remaining needs purchased through a long-term agreement with Progress Energy 71.6% 28.4%
  30. 30. NCEMPA – 2013 Budget Expenses 30 2013 Budget $767 (all dollars in millions) Power Agency Services Details Management Services $ 8.3 (1.08% of total budget) Outside Consultants $ 1.5 (0.20% of total budget) Other PAS $ 1.4 (0.18% of total budget) Total $11.2 O & M $96.6M 12.6% Fuel $76.3M 10.0% Supplemental Power Supply $194.9M 25.4% DEC Allocated A&G $30.0M 3.9% Power Agency Services $11.2M 1.5% Taxes $25.6M 3.3% Debt Service $261.4M 34.1% Power Agency Generation $12.6M 1.6% Special Funds Deposits $58.2M 7.6%
  31. 31. $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Historical Projected $87M Capital Additions (2012 - 2013) $201M Forecasted Capital Additions (2014 - 2019) $Millions Harris Retirement Brunswick 1 & 2 Retirement $1.6 Billion reduction since high in 1993 Outstanding Debt January 2013 = $2,025,720,000 Weighted Average Interest Cost = 5.24% NCEMPA – Outstanding Debt 31
  32. 32. 2012-2022 Wholesale Rate Plan No rate increases projected until 2015 3% increases 2015 - 2020 32
  33. 33. History Governance Business Current Issues The Value of Public Power Questions Agenda 33
  34. 34.  Federal Regulations / Legislation – EPA – Tax-exempt Financing  Economy  State Legislation – HB 295 REPS Repeal • SB 720 NCEMPA required to negotiate sale of assets with Duke Energy – SB 635 Limitation of Transmission Construction to Incumbent Utilities Current Issues 34
  35. 35.  Pole Attachments  NC Supreme Court Ruling on Duke‟s 2012 Rate Increase  Post Merger Report Current Issues (Continued) 35
  36. 36. 36 Duke / Progress Energy Merger Benefits • 20 MW distributed generation (owned by NCEMPA) • Increased capacity for load side generation for cities and their customers • 5 year reduction in certain fees and expenses provides protection for merger related costs • Most benefits continue through 2032
  37. 37. Agenda 37 History Governance Business Current Issues The Value of Public Power Questions
  38. 38.  To serve the needs of public power communities through collective strength, wisdom and action while promoting a more successful future for our citizens Our Purpose: The Value of ElectriCities 38
  39. 39. The Value of ElectriCities 39 ElectriCities provides benefits in 5 broad categories:  Power Supply  Load and Demand Side Management  Contract Administration  Finance  Services
  40. 40.  Reliability  Economic Development  Services The Value of ElectriCities 40
  41. 41. 41 Industry data shows that ElectriCities communities provide more reliable power and restore power more quickly than investor-owned utilities Average Outages: ElectriCities: 0.923 outages per year, Progress Energy: 1.69 outages per year Average Restoration Time: ElectriCities: 67.07 minutes, Progress Energy: 85.21 minutes Public Power Reliability
  42. 42. Public Power Reliability 42 • Industry data shows that ElectriCities communities provide more reliable power and restore power more quickly than investor-owned utilities • Economist estimates the value of this increased reliability to the customers is between $25-$30 million per year 0.923 1.03 1.69 0 0.5 1 1.5 2 ElectriCities Duke Energy Progress Energy Average Outages per Year 67.07 155.34 85.21 0 50 100 150 200 ElectriCities Duke Energy Progress Energy Average Restoration Time (in minutes)
  43. 43. Service to Members – Strategic Target Marketing – Customized City Projects – Marketing / Collateral – Advertising – Grant Opportunities – Industrial Recruitment – Retail / Commercial Recruitment Economic Development 43
  44. 44. 44 Economic Development Apex • Site review with major grocery chain developer • Site review with national full service fitness center Louisburg • Palviz North America – 15 jobs; $2.75M investment • Project Crabtree – Discount grocery store in process • Collateral material for Louisburg Industrial Park Wake Forest • Site review with major grocery chain developer • Site review with national full service fitness center • Project Zeiss expansion Clayton • Caterpillar expansion – 199 jobs; $33M investment
  45. 45. 45 Economic Development Hamilton • Smart Communities Grant (2012) - Downtown Redevelopment Robersonville • Smart Communities Grant (2012) – Signage • Customized City Project – Meeting Scheduled Scotland Neck • Smart Communities Grant (2012) - Façade Upgrades Tarboro • Customized City Project – Quality of Life brochure • Smart Communities Grant (2012) – Industrial Park Signage • Project Dellen – Site submitted to Department of Commerce Hobgood • Public Power Promotional Program (P4) – Fire retardant shirts for employees
  46. 46. Economic Development – Rocky Mount • Smart Communities Grant (2013) $4,000 for website update / economic development page • Working with Alan Matthews (Chamber ED) on promoting retail site(s) for grocery store – Met with developer at ElectriCities booth during International Council of Shopping Centers in May • Continue to market available properties with Carolina‟s Gateway Partnership – Project Blossom (Food Processing) – Project RAM (wovens) 46
  47. 47.  Safety & Training  Legal and Regulatory Compliance  Communications  Legislative Issues  Utility Operations  Business Operations  Customer Service Support  Economic Development  Commercial & Industrial Customer Initiatives  Residential Customer Initiatives ElectriCities Services 47
  48. 48. 48 Services to Help Control Power Costs • Free Energy Audits • Load Management Switches • Distribution System Improvements • Load-Side Generation Services
  49. 49. 49 Services Provided through ElectriCities Power Agency Non- Power Agency Annual Conference Yes Yes Member Relations and Education Yes Yes Emergency Assistance Program Yes Yes Statewide Service Contracts and Purchasing Yes Yes Business Operations Support (Customer Service Workshops and Performance Indicators) Yes Yes Distribution System Operations Support (Operation Standards Team and Best Practices) Yes Yes Career Development Programs Yes Yes ElectriCities Schools Yes Yes ElectriCities and NCAMES Teams Yes Yes Safety & Training Support (Crew Audits, Safety Meetings, Accident Investigations, OSHA & NESC Support) Yes Yes Territorial Support Yes Yes Storm Communications Yes Yes Regional / State Support Yes Yes Retail Billing Assistance Yes Yes Remote Read / Billing Yes Yes
  50. 50. 50 Services Provided through ElectriCities Power Agency Non- Power Agency Public Relations - Communications and Media Yes No* Customer Communication Pieces (Bill Inserts and Videos) Yes No* Wholesale Rates and Billing Yes No* Demand Side Management (Load Management) Yes No* Appliance and Voltage Control Yes No* Innovative Rates Yes No* Load Management Notification Yes No* Retail Rate Program Yes No* Power Cost Yes No* Distribution System Losses Survey Yes No* Business Development Services (C/I Energy Audits, Key Accounts) Yes No* Load Growth Initiatives Yes No* Retail /Commercial Development Yes No* No* - These programs may be available at an additional cost billed directly to the city.
  51. 51. 51 Services Provided through ElectriCities Power Agency Non- Power Agency Economic Development Support - ( Aerial Photography, Territorial Legal Advice, Prime Power Park) Yes No* Member Design and Communication Projects Yes No* Economic Development Support Yes No* NERC Services Yes No* REPS EE Programs Yes No Residential Energy Services Yes No Generator Interconnection Yes No Renewables Yes No Load Forecasting Yes No Rebate Studies Yes No Peak Shaving Generation Yes No No* - These programs may be available at an additional cost billed directly to the city.
  52. 52. 52 (as of January 2013) NCEMPA Participant Debt Responsibility
  53. 53.  Your feedback helps us: – Focus on those issues of importance to you – Deliver the best mix of programs and services – Continue to improve the value of your membership  Member Satisfaction Rating of 92% – Responses from Mayors, Board of Commissioners, City Managers, Utility Directors, Finance Directors, City Staff – Rates ElectriCities staff on Performance, Customer Service, Professionalism, Responsiveness, Accuracy Service Excellence is our goal 2012 Member Satisfaction Survey 53
  54. 54. Stay involved: Keep up with ElectriCities news – Twitter: @ElectriCitiesNC, @NCEnergyTips – YouTube: NC Public Power channel – Facebook: ElectriCities of NC All links are on the ElectriCities.com home page Stay Connected 54
  55. 55. Contact Information Graham Edwards CEO, ElectriCities of NC, Inc. Office: 919-760-6330 Cell: 843-647-8355 Email: gedwards@electricities.org Communications 55
  56. 56. 56 Questions?