I have merged my blog

Please be advised that I have merged this blog with my WNCR TV Blog.  All of this blog has been forwarded, so you won’t miss anything.

please go to www.whothehellisgeorge.com

High Point Nuclear Power Costs To Rise

…take a close look at what Edwards says about the national demand for power-dropping 3.6%.  If we weatherize our homes the demand will (in theory) drop even lower. The price will still continue to rise because not only is this a supply/demand issue but a debt issue.  All, and I mean all, of these towns have to make a certain amount of money on electricity regardless of what the wholesale rate happens to be.

High Point expects to see a 4.9 percent wholesale electric rate increase from North Carolina Municipal Power Agency Number 1 in June, and customers of the city’s municipal electric service will likely see a corresponding rate increase on their July bills, although the High Point City Council has not yet set the retail rate.
There may not be a city in North Carolina with more short-term problems than High Point: the collapse of its manufacturing industry, threats to its signature furniture market, 11.9 percent unemployment.
But the City of High Point has also come up on the winning side of some long-term bets in infrastructure and energy that leave it with a competitive advantage over other cities.
Foremost among those bets was the 1976 creation of the North Carolina Municipal Power Agency Number 1 – a coalition of 19 cities and towns in the piedmont and western North Carolina that provide power directly to their residents, rather than leaving it up to a private company such as Duke Energy – and that agency’s 1978 decision to buy a large chunk of the 2,258-megawatt Catawba Nuclear Station in York County, South Carolina.
North Carolina Municipal Power Agency Number 1 actually owns 37.5 percent of the Catawba station, and the same percentage of the output of that plant, and bought it at the 11th hour before the 1979 meltdown at the Three Mile Island Nuclear Generating Station in Pennsylvania that ended the construction of nuclear power plants in the United States. The agency also owns part of Unit 1 of the 2,200-megawatt McGuire Nuclear Station in Mecklenburg County.
High Point is the largest city that belongs to the agency, and its 97,000 electric customers are the bulk of the agency’s 164,000 customers. Asheville is the next largest. High Point owns 18 percent of the agency’s stake in the Catawba plant.
It’s not hard to imagine circumstances under which High Point’s buy-in to the Catawba plant could have turned bad and left the city with a huge stranded investment: a meltdown at the plant, regulatory changes, the emergence of cheaper sources of energy. Energy is a commodity, and large commodity investments are always a gamble.
"A few years back, when they were looking at deregulating rates, it looked like a poor investment, because it would have left the city with a whole bunch of debt and no way to pay it off," said Assistant City Manager for Operations Randy McCaslin. "But now that the deregulation discussion has gone away and environmental regulations are coming, it’s turning out to be a very good investment indeed."
The timing of the city’s bet resulted in it, and the other agency members, getting a steady supply of abundant energy just before the door was slammed on nuclear power and before years of fossil fuel price increases. Also, nuclear power emits no greenhouse gases and won’t be affected by any regulation of them.
The Obama administration’s support has sparked a resurgence in nuclear power in the United States. The Nuclear Regulatory Commission has 26 applications for nuclear plants pending. The administration in February approved an $8 billion loan guarantee for two Southern Company nuclear reactors in Georgia that would be the first built in the United States since the ’70s. But nuclear plants take a long time to license and build; the Georgia plants would not come online before 2017.
That leaves cities like High Point that own nuclear generating capacity in good shape, if their plants aren’t aging or their operating licenses expiring. The agency and High Point breathed a collective sigh of relief recently, when Catawba’s license was extended to 2043 and McGuire Unit 1′s to 2041.
High Point’s share of the Catawba and McGuire plants produces more electricity than the city’s customers use, and the agency sells the excess and applies that profit against rate increases. For example, the agency’s expected wholesale rate increase in June would have been 5.1 percent, not 4.9 percent, had it not been able to apply the profits from excess electricity sales to the rate.
Although joining the agency turned out to be a good bet, the agency, like power companies, is not without its problems, as Graham Edwards, the CEO of ElectriCities, the association of North Carolina, South Carolina and Virginia public power companies, told members of the High Point City Council in a briefing on Thursday, March 18.
Edwards said the biggest financial challenges the agency faces are a recession-driven drop in demand for its excess power, increases in taxes and capital and operating costs and a decline in investment earnings caused by low interest rates.
Edwards said national demand for power dropped by an average 3.6 percent in 2009, and demand for the agency’s output from the Catawba plant dropped 3.9 percent during the year. He attributed that decrease primarily to industrial customers cutting down on production. That effect is even more pronounced in other areas of the country. Edwards said the Midwest, where manufacturing is in free fall, saw a 60 percent drop in demand in 2009.
"We saw that as well," he said. "That dynamic, combined with low energy sales, has caused our profits to decline."
Declining profits and the high cost of running a nuclear power plant – 93 percent of the agency’s $507 million are "fixed costs" that can’t easily be lowered – have the agency increasing its wholesale rate and will mean a rate increase for High Point Electric Services customers. The High Point City Council will set the retail rate, and McCaslin said the rate increase won’t necessarily be the same as the wholesale increase. He said the retail rate increase could be higher than 4.9 percent – or could be lower, if High Point Electric Services can reduce its expenses.
Edwards said High Point would have faced an even higher wholesale rate increase had the agency not been able to refinance some of its debt and reduce costs. The Catawba plant was financed at 14 percent interest rates in the high-interest late ’70s, but the agency has since refinanced that debt down to 5 percent interest.
The agency calculated a much larger, 8.9 percent wholesale rate increase before applying refinancing, interest income and excess energy sales to bring that increase down to 4.9 percent. Still, 4.9 percent is a large increase, and it won’t be the last. The agency expects 5 percent increases in 2011 and 2012 and a 3.5 percent increase in 2013.
"We cannot continue to raise rates, even at 5 percent a year," said High Point City Councilmember Bernita Sims. "It prices people out of the market."
High Point ratepayers may see some relief in 2020, when 85 percent of the agency’s debt will be paid off, drastically reducing its costs, 35 percent of which are debt service. Edwards said, "2020 is a magic date."
But customers expecting their electric rates to drop by 35 percent in 2020 will probably be disappointed, according to McCaslin and High Point City Manager Strib Boynton, who said the agency will have to begin to capitalize its next source of energy then. High Point Electric Services rates are now comparable to Duke Energy’s, but Duke Energy has applied for a rate increase that would make its rates higher.
"You’ve got to take into consideration the high up-front cost of the plant," McCaslin said. "You probably will not see a huge drop-off in rates."
Boynton said rates won’t drop like a rock in 2020, but that High Point customers are still in better shape than customers of electric companies that depend more on fossil fuel plants with high carbon outputs that will probably be regulated.
Boynton said, "The bottom line is that’s when we’ve got to plan for the next source."

Lower Utilities & Lower Gas Prices with One Punch

Recently, I’ve been doing research on what Congress could do to help eastern North Carolina lower our electricity bills. Early on, I really believed that a financial bailout would have been the right choice. It would be easier to pay back the Feds at a much lower interest rate than to pay these bonds rates.

After talking with several Representatives, I realize this is not going to happen. Why? Well, not because the Government is out of money; not because our Reps don’t want to help. But because if our Representatives used political capital to make this happen (ie, sponsor a bill and get it to committee and on the House floor) every Northern State (New Jersey, New York, Conn., et. al.) would be wanting the same thing, and wanting there fair share of bailout money.  It is true that some northern States are paying over 23 cents per kWh.  Our 2.5 Billion of debt would be skewed into Billions more as these states came to collect their check.  Not to mention the west coast States. So, any reasonable person can see where this is going…no where.

But, there really is something Congress can do. 

Congress could and should regulate to a greater degree the Wall Street speculation of crude oil, both in the CBOT and Nymex.

Why? If you remember last year, ElectriCities sited as a major reason of our 14% plus increases was the high and unexpected cost of oil.  Specifically, the price of a barrel of oil reached to over $150.

In essence, the price of crude oil today is really not made according to a traditional relationship of supply and demand. It is controlled by National and International speculative markets.

Case in point from Yahoo Financials:

I trended this up to 2006 to illustrate a point. Take a look at the 9/11 mark, the beginning of the Iraq War mark, and Katrina Mark.

A June 2006 US Senate Permanent Subcommittee on Investigations report on “The Role of Market Speculation in rising oil and gas prices,” noted, “…there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.”

So here my point in a nutshell.

There are enough small blogs writing about utilities in eastern North Carolina, that if combined, would create a very powerful force to get attention to this matter.  Secondly, this is something that each citizen could take to their city council and get genuine support. I would assume ElectriCities would be on board with this, along with both Power Agencies: After all, their job is to buy at the cheapest price. This would certainly be good, not only for North Carolina, but for every State strapped for cash. 

Please look at this Senate Report compiled from the same sourse as above.

“Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called “futures look-alikes.”

The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress.

The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. These Large Trader Reports, together with daily trading data providing price and volume information, are the CFTC’s primary tools to gauge the extent of speculation in the markets and to detect, prevent, and prosecute price manipulation. CFTC Chairman Reuben Jeffrey recently stated: “The Commission’s Large Trader information system is one of the cornerstones of our surveillance program and enables detection of concentrated and coordinated positions that might be used by one or more traders to attempt manipulation.”

In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight. In contrast to trades conducted on regulated futures exchanges, there is no limit on the number of contracts a speculator may hold on an unregulated OTC electronic exchange, no monitoring of trading by the exchange itself, and no reporting of the amount of outstanding contracts (“open interest”) at the end of each day.”

The bottom line is this could very well save our necks…if we act to pressure Congress to do the right thing and restructure Commodity and Futures Trading through the CEA and CFTC.

Check out the Light Bill Show

Well, it’s not all about high utility bills in eastern NC, but we do spend a lot of time talking about it.  Check it out- Monday thru Friday 7-8p

http://www.ustream.tv/channel/431862

The Way OUT of NCEMPA & ElectriCities

There’s no advantage to staying with ElectriCities

I read with interest your article “ElectriCities Opens Up on Debt Options” in the March 25 edition of the Telegram. I would like to submit a couple of options that were not mentioned, as well as expand on the comments by Mr. Michael Colo with Poyner and Spruill.

I work with one of the larger customers of Rocky Mount Utilities and happen to be far outside of the city limits of Rocky Mount. We have done quite a bit of research associated with this issue as it is very important.

First off, in my opinion, there is no larger issue facing Rocky Mount, Wilson, Greenville, New Bern and the many other municipalities who chose to become members of ElectriCities. These cities did not necessarily volunteer for membership, but due to projected electricity shortages, joined to ensure a stable energy source. This was approved through the N.C. General Assembly. The agency provided energy as projected until around 1999, after the flood.

Soon after the flood and in conjunction with numerous other causes, electricity consumption dropped in Eastern North Carolina.

The loss of several manufacturing facilities, which used large amounts of electricity, caused demand to drop. Unfortunately, the debt associated with ElectriCities remained as it does today. This burden on our communities will only continue to grow as businesses relocate out of the ElectriCities grid. No energy-intensive business will choose to locate a business on this grid when it can move only a short distance away and connect to a source that is at least 40 percent less. Assuming this is true, our utility rates will continue to grow, regardless of what happens to energy prices in general because fewer customers will be servicing the debt.

Around 1999, Bill Johnson, the current president of Progress Energy, led a team that made an offer to purchase ElectriCities. At this time, as is still true, the debt exceeded the value. The municipalities involved determined that paying off the additional debt would be an unfair burden and did not pursue this option. Eleven years later, the condition has deteriorated. Debt levels, as a percentage of consumption, continue to rise as do our rates. Our city leaders would have us believe that the best option is to stay the course and that we will have the debt paid off some day. The question is: Once the debt is paid off, what will we own?

The answer is: part of two nuclear power plants you have no control over that will continue to cost money as new regulations come in to play, costing more money. Moreover, our municipalities do not generally favor getting out of the utility business. The city of Rocky Mount will have to raise property taxes to cover lost revenue associated with the utilities.

I would suggest residents would still be better off under a system whereby you purchase your electricity from Progress Energy. There is absolutely no benefit to any municipality staying with ElectriCities.

In addition, the city of Rocky Mount continues to encourage conservation and ways to insulate citizens’ homes. Actually, this is what they do not need to occur. Electricity consumption needs to increase or rates will go up to pay off the debt. As a property owner, I recently rented a home out in a rural area. I ran an ad in the paper and out of around 30 inquiries that I received, at least 25 asked who supplied the power. We have a problem and everyone is aware of it.

The two best options for getting out of ElectriCities are as follows:

Sell the entire N.C. Eastern Municipal Power Agency (ElectriCities) to Progress Energy. Even if a short sale occurs, whereby the municipalities have debt remaining associated with ElectriCities, our utility rates will decrease dramatically. Estimates would be 20 to 25 percent rate reductions and still pay off the remaining debt.

The better option is to contact the members of the General Assembly and ask them to step in and broker a sale to Progress Energy. Allow the N.C. Utilities Commission to allow Progress Energy to raise rates enough to cover the difference between the “value” of N.C. Eastern Municipal Power Agency and the debt.

Both options would require all involved municipalities to agree to sell. My guess is if Rocky Mount, Greenville and Wilson agree everyone else wouldl agree. These three have more than 50 percent of the debt.

I would contend that no other program at the federal or state level would put more money in to Eastern North Carolina. Ultimately, $2.6 billion would be paid off by all customers of Progress Energy leaving more money for the residents.

Progress Energy would not be buying new assets, rather it would be taking control of assets it is already supplying power to. The incentive for Progress Energy is more direct customers, each of which represents long-term profit opportunities for Progress Energy.

The only way this will occur is if citizens demand this option through our representatives. The easy thing for our representatives to do is stay the course. The better option for the citizens is to sell N.C. Eastern Municipal Power Agency. It can and must be done for the future of Rocky Mount and the surrounding area.

Thomas Joyner

Rocky Mount

Dominion rates are low low low

Dominion is looking for a rate hike, but look at how low the average cost is for Dominion customers.  –BTW, they haven’t raised rates in 17 years.  Can’t say that for NCEMPA! Can you?

 

Dominion Power seeks rate hike

From staff, wire reports

Tuesday, February 16, 2010

The major electric utility in northeastern North Carolina wants to charge more for its power.

Dominion North Carolina Power has asked state regulators to allow the company to raise its base rates by 9 percent.

The request comes on the heels of a decision by city officials in Elizabeth City to reduce retail electric rates 1.65 percent, reducing the monthly bill by about $2.50 for a $150 electric bill and $3.30 for a $200 bill.

Prior to last month’s rate reduction, the city had increased retail rates 18 percent in the past 18 months, passing on to local customers the increased rates the city was paying to its wholesale supplier, the N.C. Eastern Municipal Power Agency.

The proposed increase for Dominion customers would boost the average monthly residential bill from about $99 to $108, before taxes.

If approved by the North Carolina Utilities Commission, it would be the Virginia company’s first increase in base rates in 17 years.

Lots of Town Looking to Pull the Plug

Pulling the plug?

 

This photograph shows the City of Washington’s $2.68 million bill for the power it purchased in January. Some N.C. Eastern Municipal Power Agency members are considering leaving the agency because of what they say is frustration and concerns over high electric bills they and their customers are paying. (WDN Photo/Mike Voss) �

Some NCEMPA members exploring leaving group

By MIKE VOSS
Contributing Editor

Published: Sunday, March 7, 2010 2:18 AM EST

Washington and other eastern North Carolina cities and towns that sell power might be able to withdraw from a power agency that has those cities and town’s power customers paying high electric bills, a power agency lawyer said last month.
Washington Mayor Archie Jennings said Washington is keeping abreast of the movement calling for power-agency members to disconnect from the power agency.
“We’ve been watching it very, very closely,” Jennings said in an interview last week.
Jennings said the relationship between the power agency and its members has reached a “critical juncture.”

“Washington is not the only community that cannot afford to be a member,” he said.
A city or town wanting to leave the North Carolina Eastern Municipal Power Agency faces many challenges, not to mention someone taking over that city or town’s share of $2.6 billion in debt that NCEMPA’s 32 members are obligated to pay, said Michael Colo, the lawyer representing NCEMPA. Colo’s remarks came during the power agency’s Board of Commissioners’ meeting in Wilson, according to the Rocky Mount Telegram.

Wilson NAACP Takes on Electricities

More than 75 people who attended the community meeting hosted by the Wilson branch of the NAACP Thursday night agreed on some short-range goals they want City of Wilson leaders to accomplish.

The group voted to ask city council to place all customers on billing dates that are payday friendly. They also want the city to put together a committee to review city policies. The group also voted to support a city-wide blackout on March 18 for 12 hours from 6 a.m. to 6 p.m. to get the attention of city leaders.

Shafeah M’Balia came from Rocky Mount to say that citizens there have the same problems with high utility bills as Wilson residents and cities should unite.

M’Balia said because of high electric bills, residents in Rocky Mount formed a grassroots group called Utility Working Group of the People’s Assembly.

"No one city can fight ElectriCities alone," M’Balia said. "Each city has to first unite their citizens. Then each city has to unite. We need to unite and form a people’s movement."

…did the RMT Chamber forget something?

Under relocation information the Rocky Mount Chamber lists 3 Electric Companies.  Pop quiz…which one did they leave out?

Answer: The utility company that’s actually in Rocky Mount.  Ah, don’t worry, folks who move here will find out about Rocky Mount Public Utilities soon enough.  Like when they get their first bill.

Click Here For Chamber Site

Oh, and if the Chamber says they only list members, I call BullShit!

Telegram Clarifies Western Rate Hike..sort of…

The Telegram wrote: “In any case, no need to panic Rocky Mount”

Well, I panic when it looks like the Telegram has started to work for Electricities.

From Telegram: This post intended to clear up confusion among a few Rocky Mount readers who happened upon this recent headline in the The Dispatch of Lexington:

For one thing, I think everyone on the east side knows where Lexington is located.  Anyone who has followed this blog for a month, or read any of the posts, knows there are two electric boards.

What was so interesting about this article (from the Dispatch) is only last summer ElectriCities officials were saying how much better off the western board was compared to the eastern board.  That was about the same time NCMEPA was raising our rates to high heaven. 

Raber at an NCEMPA meeting in Wilson, NC (last year) specifically talked about the cost of running coal fired plants, which are mostly in the east compared to nuclear mostly in the west.

Another snippet from the Telegram: ElectriCities Senior Vice President Ken Raber told me today the eastern agency is in better shape and might be able to avoid a rate increase during the next five years.

My take on this is…Wow, what a difference a year makes.  Now, notice the word “might.” Ask any politician, might is a very powerful word when you’re looking for cover. Always give yourself a way out.

I wish the Telegram had gotten a break down of all those “complicated differences” Raber was talking about.  I’m sure none of those differences happen to be political or board management?

But, alas, let’s take a look at that next to last sentence. 

The western agency, for one, historically has sold surplus electricity on the open market to help keep rates down for member cities, but those sales are way down in the recession.

Well, for one thing, why do you think markets gravitate to utilities in a recession? Because utilities are pretty much recession proof.  You can go without buying a new car, a bigger house, or that new dress you’d just die for, but you can’t crunch but so much of your utility budget.

In a nutshell, I would implore the Telegram to ask questions. Then to investigate if those answers are correct.  Don’t get use to being spoon fed.  Yes, ElectriCities has a very big spoon, but that isn’t chocolate ice cream they’re feeding you.