FREQUENTLY ASKED QUESTIONS
Alternatives
Bad Debts and Financials
ElectriCities
North Carolina Eastern Municipal Power Agency (NCEMPA)
Rocky Mount and its Debt
Rocky Mount Utility Rates
Rocky Mount Utility Revenue
ALTERNATIVES
Can we look at alternative energy sources for energy production - solar, wind, etc?
When the power supply contract was negotiated NCEMPA evaluated various alternatives, but only focused on those that were the most cost-effective. Solar and wind are still much higher costs than our contract. Until 2017 (the expiration of the contract with PEC), we are obligated to purchase all our needs from PEC. This contract is very competitive and lower than any other alternatives considered.
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BAD DEBTS AND FINANCIALS
What is the level of pay arrangements we carry -- # individuals, dollar amount, average over time? Commercial? Residential?
Date is not available.
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What is the level of our bad debts -Commercial? Residential?
Write-off by Customer Class:
2006 (potential)
Residential Commercial
$835,187.26 $267,216.92
75% 25%
2005
Residential Commercial
$1,500,896.72 $70,051.80
95% 5%
2004
Residential Commercial
$1,022,083.01 $327,025.80
70% 30%
2003
Residential Commercial
$1,008,637.23 $431,811.45
70% 30%
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ELECTRICITIES
What is ElectriCities?
ElectriCities is a not-for-profit government service organization representing cities, towns and universities that own electric distribution systems. Today, ElectriCities represents more than 90 members in North Carolina, South Carolina and Virginia.
Formed back in 1965 to protect the interests of Public Power customers, and to provide a unified voice to speak out in the North Carolina legislature, ElectriCities continues today to serve Public Power communities.
ElectriCities provides customer service and safety training, emergency and technical assistance, communications, government affairs and legal services. Through consolidation of these services, members save their customers the expense of administering these functions locally. ElectriCities also provides management services to the state's two municipal Power Agencies: North Carolina Municipal Power Agency Number 1 (NCMPA1) and North Carolina Eastern Municipal Power Agency (NCEMPA). Most member cities have been in the electric business for 100 years or more.
Originally the cities built small generators in their hometowns. In some cases, the municipalities set up their own systems when other power suppliers refused to serve these communities. As their population grew and their generators aged, the cities became wholesale purchasers of electricity from the state's investor-owned utilities.
During the energy crisis of the mid-70s, the investor-owned utilities feared shortages and were unable to guarantee future power supply. The state needed additional power plants but the investor-owned utilities were having difficulty raising the necessary capital for construction. After considering concerns about reliability, cost, and long-term supply of electricity, the North Carolina Legislature enacted legislation to enable cities to join together to form Municipal Power Agencies, paving the way for cities to enter the generation business. Fifty-one cities in North Carolina chose to form two Municipal Power Agencies and issued electric revenue bonds. Combined, the Power Agencies own portions of five nuclear and two coal-fired plants totaling more than 1450 MW of generation capacity.
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Why was ElectriCities formed?
In 1965, the battle for territory between private utilities (investor-owned utilities), electric cooperatives, and the cities intensified statewide. The result was the 1965 Electric Act, promising to resolve many of the disputes between the investor-owned utilities and co-ops. The 1965 Act, however, created new difficulties for municipal systems, which were left out of the legislation by restricting their right to serve customers in areas annexed in the future.
ElectriCities was organized to provide the municipal systems a unified voice to speak out in the legislature against the bill. The group was unable to stop passage of the bill, but decided to form a permanent alliance to help Public Power become a stronger voice for its customers statewide. In 1983, at the request of the cities, the Legislature expanded this voluntary association with the passage of Chapter 159B of the North Carolina General Statutes allowing North Carolina's "electric cities" to form a joint municipal assistance agency to provide aid and assistance to municipalities in the construction, ownership, maintenance, expansion, and operation of their electric systems.
Since then, ElectriCities has been a powerful force for Public Power in North Carolina, and now has grown to reach cities in Virginia and South Carolina.
Based in Raleigh, ElectriCities' staff members watch legislative issues closely to ensure its members have a voice in any legislation that may affect electricity issues. ElectriCities members are currently preparing for future competition. They want to make sure Public Power helps shape any legislation which could restructure the electric utility industry.
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How and when did Rocky Mount get involved with ElectriCities?
In 1965 the NC legislature enacted the Territorial Act. This Act did not include the cities and as a result the NC Municipally Owned Electric Systems Association was formed to represent the cities' interest. This organization later changed its name to ElectriCities of NC. Rocky Mount joined October 12, 1966.
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What is the legal arrangement with ElectriCities?
There is no legal arrangement between ElectriCities and Rocky Mount. ElectriCities is a Joint Municipal Assistance Agency and membership is established annually by payment of dues.
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What do we contribute to ElectriCities?
Rocky Mount's dues to ElectriCities for 2007 are estimated to be $46,046.
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What do we get from ElectriCities?
- ElectriCities is a not-for-profit government service organization representing cities, towns and universities that own electric distribution systems.
- ElectriCities provides customer service and safety training, emergency and technical assistance, communications, government affairs and legal services.
ElectriCities also provides management services to the state's two municipal Power Agencies: North Carolina Municipal Power Agency Number 1 (NCMPA1) and North Carolina Eastern Municipal Power Agency (NCEMPA).
With the strength of its membership, ElectriCities is able to provide consolidated technical, administrative, and management services to its members. By using services offered at group rates, member cities are able to maintain their electric systems and equipment better. Services including aerial device testing, infrared scanning and substation maintenance training cost are significantly less through ElectriCities contracts than if the cities contracted the services themselves, demonstrating collective strength.
ElectriCities schools and workshops keep utility personnel up-to-date on how to properly handle hazardous substances, customer service, utility credit and collections, load conservation marketing and other aspects of the business. Comparable schools elsewhere cost two to three times more. Training programs encourage safe work habits and reduce potential liability. Lineman training and municipal transformer schools teach member city employees step-by-step safety measures to use in their daily duties. Retail rate assistance helps municipalities establish effective rate schedules. Communications, legislative and legal services present a unified message for Public Power across the state.
Through the Emergency Assistance program, cities help each other in times of disaster. For the electricity industry, the forces of Mother Nature present regular challenges, and can be particularly hard here in North Carolina. Despite the direct hits, municipal crews continue to beat the averages, restoring power to customers, while significant numbers of other utility customers remain in the dark.
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How is ElectriCities funded?
ElectriCities is a not-for-profit organization that is financed through membership fees and dues, as well as through rate and service revenue and tuition from training programs and workshops. With a re-organization several years ago, a new status was created to allow for associate members, which include the South Carolina and Virginia cities and university systems.
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What would we have to do to get out of ElectriCities? If we did, what would be our options for continuing to operate our utility?
ElectriCities is supported by Member dues. If Rocky Mount wants to terminate its relationship with ElectriCities, all that needs to be done is not pay the annual dues.
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NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY (NCEMPA)
What are Power Agencies?
North Carolina has two municipal Power Agencies, North Carolina Municipal Power Agency Number 1 (NCMPA1) and North Carolina Eastern Municipal Power Agency (NCEMPA).
In the eastern part of the state, 32 cities and towns are members of NCEMPA. The agency owns interest in five generating units built and operated by CP&L. These facilities include three nuclear units, Brunswick Units 1 and 2 in Brunswick County and Shearon Harris Nuclear Plant in Wake County, and two coal-fired plants, Mayo Plant and Roxboro Unit 4 in Person County.
Both agencies purchase supplemental power above their ownership allotment as they need it in the wholesale market generally from the investor-owned utilities and federally owned hydro-electric systems.
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Why were the Power Agencies formed?
In the late 1970s and early 80s, the electric utilities and state legislators became concerned that there would not be enough electricity to meet the state's future needs. The state's two investor-owned utilities (Duke and CP&L) had plans to build more plants, but high interest rates and rising fuel costs put the companies in a financial bind. They were concerned they did not have the capital to complete the projects.
In its October 1981 inaugural edition, Business North Carolina's cover story focused on this issue and quoted CP&L's Sherwood Smith as saying, "Utilities are facing their greatest crisis" in more than 25 years. The article, predicting a possible electricity shortage in the state by 1990, stated that construction of new generating plants had come to a near standstill because the state's investor-owned utilities did not have enough money to build the generating plants, this at a time when rates had increased 300 - 400%.
The cities, which then purchased wholesale power from Duke and CP&L, were equally concerned that those utilities would not be able to supply enough power for the cities' citizens.
The municipalities were significant providers of electricity and had an obligation to serve their customers. In an effort to ensure an adequate, reliable and economic supply of electric power and energy to the citizens of the state, the NC voters approved a 1975 legislative amendment to the state constitution which authorized the municipalities to jointly build, finance, own and operate electric generation and transmission facilities with the investor-owned utilities. Fifty-one cities chose to form Power Agencies and issued electric revenue bonds to help finish construction of the plants.
The Legislature, the State Treasurer, the North Carolina Utilities Commission, and the voters of North Carolina all approved the cities' actions to create the Power Agencies. At the time, demand for electricity was projected to increase at a rate high enough to allow the cities to pay off debt, service their electric systems and provide for other municipal services. Because the municipalities helped build the plants, the state of North Carolina has enjoyed a plentiful and reliable source of power to spur economic growth.
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How and when did Rocky Mount get involved with North Carolina Municipal Power Agency (NCEMPA)?
Rocky Mount executed the Project Power and Supplemental Power Sales Agreements September 28, 1981.
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What is the legal arrangement with North Carolina Municipal Power Agency (NCEMPA)?
Rocky Mount has executed two agreements with NCEMPA:
- Project Power Sales Agreement: Commits each participating City to receive power generated by the five generating units partially owned by NCEMPA in exchange for each City making bond payments all in accordance with each City's percentage of ownership. Rocky Mount's percentage of ownership is 16.026%.
- Supplemental Power Sales Agreement: Commits each participating City to purchase all required power above that generated by the five generating units from the agency.
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What do we contribute to North Carolina Municipal Power Agency (NCEMPA)?
- Rocky Mount pays NCEMPA for the city's monthly wholesale power purchases.
- The projected cost of power from NCEMPA for fiscal year 06-07 is $66,815,000.
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What do we get from North Carolina Municipal Power Agency (NCEMPA)?
- The agency supplies all wholesale power needs to Rocky Mount.
- The agency owns interest in five generating units built and operated by Progress Energy. These facilities include three nuclear units, Brunswick Units 1 and 2 in Brunswick County and Shearon Harris Nuclear Plant in Wake County, and two coal-fired plants, Mayo Plant and Roxboro Unit 4 in Person County.
- The agency purchases supplemental power above their ownership allotment as they need it in the wholesale market generally from the investor-owned utilities and federally owned hydro-electric systems.
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What has NCEMPA done for the City of Rocky Mount and the other participants?
Through Power Supply Negotiations, Contract Cost Review and Load Management Operations, NCEMPA staff accomplishments during 2004 and 2005 continued to provide significant savings for Participants.
- During 2004, recent power supply negotiations, contract review and plant up-rates added over $19 million in value to the current power supply program. Examples include:
Scrubber Cap ........................... $9.1M
Dry Cask Storage O&M ................... $0.4M
SLA A&G cost avoidance ................. $3.1M
Brunswick Unit 1 MDC Up-rate Benefit ... $1.7M
Waiver of Escrow Requirements .......... $1.25M
NOx Over-compliance credit for 2004 .... $1.2M
- Contract cost review and audits resulted in over $3 million in savings through billing corrections and proper cost allocations.
Harris Cost of Equity Sellback Calculation ... $1.5M
Roxboro Coal Inventory Adjustments ........... $1.5M
- Power Agency staff and members realized a significant savings in power costs for 2004 through load management operations: $33M
Most of these savings are seen directly by the participating retail level customers.
- Staff provided power audits for members' retail customers, valued at over $250,000.
- Remote metering and billing assistance, provided under the Retail Billing Program would cost over $100,000 if provided at the investor-owned utility rates.
- Agency staff provided retail rate analyses, rate design and additional assistance worth more than $90,000, including assistance for several high profile customer choice wins for 2004.
- The load side generation program continues to expand, providing competitive opportunities for the members and their customers. There is currently over 177MW of load side generation installed and over 72 MW of PURPA qualified generation also installed and operating.
- During 2005, recent power supply negotiations, contract review and plant up-rates added over $30 million in value to the current power supply program. Examples include:
Execution of OATT, Transmission Service Agreement
Benefit in 2005 .................... $3M
Estimated Annual Benefit ........... $6M
Estimated Benefit through 2009 ..... $27M
NOx Over-compliance Credit for 2005 .... $1.1M
Brunswick Unit 2 MDC Up-rate benefit ... $0.1M
Annual Energy Credit ................... $1.2M
- Contract cost review and audits resulted in over $1 million in savings through billing corrections and proper cost allocations:
Billing Corrections and Adjustments .... $1.0M
- Power Agency staff and members realized a significant savings in power costs for 2005 through load management operations: $33M
Most of these savings are seen directly by the participating retail level customers.
Participants will continue to benefit through renewal applications for Nuclear Operating Licenses for up to 20 additional years, which have been developed for Brunswick Units 1&2 and Harris Nuclear Plants.
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What would we have to do to get out of NCEMPA? If we did, what would be our options for continuing to operate our utility?
The simple answer is that it is possible. The practical answer is that it is not feasible. It is a very long and complex legal process simplified into a few steps. Please do not interpret this as a legal opinion as the actual steps are more complex.
- The $446,313,683 would have to be paid - however, this does not eliminate the obligation of 15.026% of the debt.
- Another nonprofit entity would have to assume Rocky Mount's share of the output - there are limits to how much a Participant can take.
- Legal and Engineering opinions must confirm that it will not have an adverse effect on the Agency.
It is unlikely that any of these would happen.
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Can we get/do we need an independent consultant/expert to review our operations/situation and advise us on alternatives?
NCEMPA currently works with utility experts in the areas of legal, regulatory, engineering, legislative and finance as well as others with specific areas of expertise (such as transmission, alternative fuels, etc.) As an example, when the last power supply contract with PEC was negotiated a team of experts was brought in to evaluate a range of alternatives. Included on this team was Mack Green, (Former Greenville Utilities General Manager) who represented the interests of the Participants. The final negotiated deal was many million dollars better than the next best alternative.
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What is the NCEMPA Debt Responsibility by Power Agency Participants?
Click here to view the latest statistics.
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ROCKY MOUNT AND ITS DEBT
Can we get/do we need an independent consultant/expert to review our operations/situation and advise us on alternatives?
- In 2003 the engineering firm of Booth and Associates was engaged to perform an electric system power loss and billing analysis. The analysis covered three broad areas: electric distribution system power loss, electric metering and billing process review and financial forecast and billing verification. The recommendations of the study were implemented and resulted in a reduction of electric distribution system losses from 6.71% in FY 02-03 to 3.47 % in FY 04-05. For an electric distribution system of our size losses of between 4.0 to 4.5% are expected. Losses less than 4% are exceptional.
- In 2003 Booth and Associates was engaged to develop a Long-Range Plan for the electric distribution system. The Plan was to focus predominantly on the need for electric system upgrades and renewals to maintain adequate service to the City over the next twenty years with the primary focus on the first ten years. We have used this Plan to guide us in planning and preparing the five year Capital Improvement Plan and operating budgets.
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What is the history on this debt we have? How much is it and how do we pay it? How long will we be paying it?
- NCEMPA originally borrowed $3.55 Billion for the purchase and construction of the generating plants, of which Rocky Mount's portion was $569 million or 16%. As of February 2, 2006, NCEMPA's outstanding debt is $2.78 Billion and Rocky Mount's portion is approximately $446 million.
- The debt service costs are embedded in NCEMPA's wholesale rates in the demand and energy components which we pay on a monthly basis for our wholesale power purchases.
The debt will be paid off by January 2026.
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What was the thinking involved in incurring that debt? What are the pros and cons and why is it now such a burden on our rates? Can we get out of this debt? What would be involved?
In the 1970s CP&L raised wholesale rates over 400%. During that time utilities (and Rocky Mount) were experiencing growth more than double what today's forecasts are. CP&L informed the cities that they would likely experience shortages because CP&L did not have the capacity to serve the load. In that case the cities would be the first to lose power because they were wholesale customers. In 1975 an amendment to the State Constitution authorized the formation of the power agencies for the purpose of partnering with the investor-owned utilities to ensure there would be adequate capacity to reliably serve all citizens in North Carolina.
In 1981 negotiations were completed for the cities to buy into the following projects:
- Brunswick Nuclear Plant Units 1 & 2 - In operation 1977 & 1975
- Roxboro Unit 4 - In operation 1980
- Mayo Units 1 & 2 - Unit 1 in operation 1983, Unit 2 was cancelled
- Harris Units 1, 2, 3 & 4 - Harris Unit 1 in operation in 1987, Units 2, 3 & 4 were cancelled
Harris Unit 1 cost almost $4 billion to complete - more than three times the original estimate. The reason for the debt at the level it is today is the cost to build Harris Unit 1.
By executing the Project Power Sales Agreement, Rocky Mount is obligated to pay its Participant Share of the debt - currently $446,313,683. In addition, under the Project Power Sales Agreement Rocky Mount has pledged their electric revenues for payment of its portion of the bonds.
There are some cities in North Carolina, Fayetteville, for example, that are not members of the Power Agency. At the time the Power Agency was being formed, these cities chose not to participate. In Fayetteville's case, this was due to their not needing additional generating capacity.
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ROCKY MOUNT UTILITY RATES
How do our rates compare with similar cities and private utilities? Even if it's not apples to apples - how do we compare and what's different?
Neither the City nor ElectriCities has rate comparison information or the resources to gather and keep such information current. There are several things to consider: Each city, each investor owned utility and each cooperative utility are very different. They each have a different mix of customers (residential, commercial and industrial), a different mix of energy supply (nuclear, coal, natural gas), different levels of load management, different distribution systems and losses, different budget philosophies at the retail level and different financial situations and obligations. Since it is not possible to compare "apples to apples", any comparison would be of little value especially considering the work involved and therefore is not performed.
The establishment of utility rates is very, very different from establishing the costs for consumer goods or services. Consumer goods and services can have a variable profit margin built into their cost. Utility rates are established to ensure all costs are covered and allocated to the correct rate class - nothing more and nothing less - so there is no room to adjust the rate up or down in comparison with another utility's rates.
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What are our options to control and/or reduce rate increases?
See above (click HERE).
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Can you provide a review of rate increases for all utilities over last 3 years?
Click HERE to view rate change histories.
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ROCKY MOUNT UTILITY REVENUE
How does our net revenue from sale of gas and electric compare with private utilities and other similar ElectriCities? Who's doing better or worse than we are and why?
We do not have this information. As with rate comparisons, comparisons such as this can be meaningless because of customer mix, load factor, growth, policies on capital vs. operating expense, system voltage, losses and transfers.
ElectriCities does provide a comparison of Distribution Related Expenses (cents/kWh). This is defined as:
(Note: A lower number is desired)
For FY ending June 30, 2004:
Rocky Mount 1.86
NCEMPA - Median 2.20
NCMPA1 - Median 1.94
NCEMPA & NCMPA1 - Median 2.19
Progress Energy 2.01
NCEMC's (Cooperatives) 3.50
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Where does our consumer electric, gas, water, sewer, stormwater dollar go?
See the Allocation of Expenses/Expenditures & Fund Balance Spreadsheet & Graphs.
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What amount of revenue do we receive monthly for electricity, gas, water, sewer, stormwater? And where does it go?
See "Allocation of Expenses/Expenditures & Fund Balance Spreadsheet & Graphs".
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