Eastern North Carolina Mayors’ Association
North Carolina Eastern Municipal Power Agency
ElectriCities of NC, Inc.
November 4, 2010
Kinston, North Carolina
We hear you!
• Who is ElectriCities? Who is NCEMPA?
• Rates and Rate Disparity with Other Utilities
• NCEMPA Debt
• ElectriCities/NCEMPA Expenses
• Reserve Funds and Working Capital Levels
• Transfers from Electric Fund to General Fund
• Contracts with Cities and Progress Energy
2
Double
Digit
Interest
Rates
1982
32 cities
become
wholesale
customers
under
NCEMPA
1979
Three Mile
Island Nuclear
Event
ElectriCities
organized
ElectriCities and NCEMPA Timeline
North Carolina
Legislation
passes Electric
Act to allow joint
municipal utility
action
Late 1960’s 1980’s1970’s
National
Energy
Crisis
1975 &1977
Brunswick
Units starts
producing
power
1976
North Carolina
Eastern Municipal
Power Agency
organized
1987
Harris Nuclear
Unit starts
producing
power
1990’s
Deregulation
of Electric
Industry
1993
NCEMPA
debt peaks
at $3.6 billion
1998
Supplemental
Power Supply
Contract
renegotiated
2000’s
2001, 2002 & 2005
Supplemental
Power Supply
Contract
renegotiated
2010
NCEMPA
current
debt
at $2.4 billion
California
Experiences
Blackouts;
Deregulation
efforts stop
2006
Brunswick
Nuclear Units
license extended
to 2036 & 2034
2008
Harris Nuclear
Unit license
extended to
2046
5
NCEMPA Power Supply
Contract Arrangements
Sources of Electricity
Project Sales Agreement
• Brunswick Nuclear Unit 1 & 2
• Harris Nuclear Unit 1
• Roxboro Unit 4
• Mayo Unit 1
~ 62%
~ 38%
Supplemental
Load Agreement
NCEMPA 32 Member Cities
Progress Energy Carolinas
Project
Sales
Agreement
Supplemental
Load
Agreement
Operating
and Fuel
Agreement
Bond
Holders
NCEMPA
8
Governance StructureRates, Budgets and Debt
NCEMPA Board of Commissioners
Primary Responsibilities
• Accepts/rejects wholesale rates
• Adopts NCEMPA budgets
• Concurrence with debt issuance
ElectriCities Staff
Primary Responsibilities
• Provides management
services to the Power Agencies
• Provides other joint municipal
assistance services to
87 cities in NC, SC and VA
ElectriCities Board of Directors
Primary Responsibilities
• Charged with the 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
• Sets policy and strategic direction
Trade
OrganizationGovernment Relations
Member Services
Safety & Training
Economic Development
10
Kinston
William Barker
Scott A. Stevens
Rhonda F. Barwick
La Grange
John P. Craft
Larry Gladney
Bobby Wooten
Laurinburg
Edward F. Burchins
Curtis B. Leak
Louisburg
Ray Patterson
Tony L. King
Mark R. Warren
Lumberton
Harry L. Ivey
Vacant
New Bern
Jonathan Rynne
Dennis K. Bucher
Mayor Lee W. Bettis, Jr.
Anne-Marie Knighton
Secretary-Treasurer
EdentonApex
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
Vacant
Elizabeth City
Richard Olson
Mayor Roger A. McLean
Farmville
Richard N. Hicks
Vacant
Fremont
Leon V. Mooring
Kerry McDuffie
Harold Cuddington
Greenville
J. Freeman Paylor
J. Bryant Kittrell, Jr.
Ronald D. Elks
Hamilton
Herbert L. Everett
Mayor Donald G. Matthews, III
Hertford
John Christensen
Mayor James Sidney Eley
Hobgood
Stella Daugherty
Mayor Timothy D. Purvis
Hookerton
Mayor Robert E. Taylor
Ryan Stocks
Danny Taylor
NCEMPA Commissioners and Alternate Commissioners; Alternate Commissioners' names appear in italics.
NCEMPA Board of Commissioners Appointed by Local Governing Board
NCEMPA Officers
Samuel W. Noble, Jr.
Chairman
Tarboro
Mayor Vivian A. Jones
Vice Chair
Wake ForestPikeville
Lyman G. Galloway
W. Ward Kellum
Dennis K. Lewis
Red Springs
Mayor John M. McNeil
Vacant
Robersonville
Elizabeth W. Jenkins
John David Jenkins
John H. Pritchard, Jr.
Rocky Mount
Andre D. Knight
Stephen W. Raper
Richard H. Worsinger
Scotland Neck
Mayor James E. Mills, Sr.
Nancy Jackson
Selma
Richard Douglas
Donald Baker
Mayor Charles E. Hester
Smithfield
Eric M. Williams
C. Earl Botkin
Southport
M. Alan Thornton
Ralph Cardwell
Richard E. Boguskie
Tarboro
Samuel W. Noble, Jr.
James L. Alford
Wake Forest
Mayor Vivian A. Jones
Mark S. Williams
Washington
Doug Mercer
Keith Hardt
James C. Smith
Wilson
Donald I. Evans
Fred R. Horne
11
NCEMPA – 2010 Budget Expenses
2010 Budget $705(all dollars in millions)
Power Agency Services Details
Personnel Cost
- Salaries & wages $ 4.1 (0.6% of total budget)
- Benefits $ 1.2 (0.2% of total budget)
- Other PAS $ 5.7 (0.8% of total budget)
Total $11.0
Operations and Maintenance
$71.610.2%
Fuel$104.5
14.8%
Supplemental Load Agreement
$158.222.4%
PEC Allocated Administrative and
General$31.34.4%
Power Agency Services$11.0
1.6%
Taxes$26.2
3.7%
Debt Service$273.8
38.8%
Capital Additions and Decommissioning
$28.04.1%
13
NCEMPA – Outstanding Debt
• Fixed interest rates: about 5.5% on average– Stability for planning purposes
• Debt continues to decline
Mil
lions
$
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Historical
Projected
NCEMPA
$ M
illi
on
Harris license
extension
Brunswick 1 & 2
license extensions
$1.05 Billion reduction
since high in 1993
14
NCEMPA Participant
Responsibility for Debt
Gross Gross
Percentage Dollar Percentage Dollar
City/Town Ownership Responsibility City/Town Ownership Responsibility
Apex 0.7056% 16,908,504 Laurinburg 2.2675% 54,336,783
Ayden 1.1340% 27,174,382 Louisburg 0.8577% 20,553,322
Belhaven 0.4090% 9,800,990 Lumberton 5.1568% 123,573,945
Benson 0.5773% 13,834,013 New Bern 6.3676% 152,588,709
Clayton 0.7448% 17,847,866 Pikeville 0.2046% 4,902,891
Edenton 1.5961% 38,247,823 Red Springs 0.5798% 13,893,921
Elizabeth City 4.2510% 101,867,988 Robersonville 0.5066% 12,139,808
Farmville 1.2901% 30,915,053 Rocky Mount 16.0260% 384,035,846
Fremont 0.3062% 7,337,562 Scotland Neck 0.5762% 13,807,653
Greenville 16.1343% 386,631,071 Selma 0.8102% 19,415,066
Hamilton 0.0783% 1,876,326 Smithfield 2.0056% 48,060,794
Hertford 0.4124% 9,882,465 Southport 0.7139% 17,107,400
Hobgood 0.0913% 2,187,849 Tarboro 4.7427% 113,650,743
Hookerton 0.1550% 3,714,312 Wake Forest 0.7262% 17,402,148
Kinston 8.6678% 207,709,092 Washington 5.8920% 141,191,764
LaGrange 0.5014% 12,015,199 Wilson 15.5120% 371,718,710Subtotal 887,950,496 1,508,379,504
Total Debt 2,396,330,000
(as of 9/30/2010)
15
Wholesale Power Cost Projections
$0
$30
$60
$90
$120
$150
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Ave
rag
e C
ost
s ($
/MW
h o
f AR
En
erg
y @
Del
iver
y P
oin
t)
NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY
Components of Projected All Requirements Power Costs (Based on July 2010 Rate Work)
Other Project Costs Supplemental Costs Net Debt Service
Net Debt Service
Supplemental Costs
Project Costs (including Operations &
Maintenance, Fuel, and Capital Additions
Projected Wholesale Power
Cost in the Region
Net Debt Service
16
Wholesale Power Cost Projections
$0
$30
$60
$90
$120
$150
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Ave
rag
e C
ost
s ($
/MW
h o
f AR
En
erg
y @
Del
iver
y P
oin
t)
NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY
Components of Projected All Requirements Power Costs (Based on July 2010 Rate Work)
Other Project Costs Supplemental Costs Net Debt Service
Net Debt Service
Supplemental Costs
Project Costs (including Operations &
Maintenance, Fuel, and Capital Additions
Projected Wholesale Power
Cost in the Region
Net Debt Service
17
National Residential Rates
Source: Energy Information Administration
NH: 16.2¢
RI: 16.5¢
CT: 19.5¢
NJ: 16.9¢
MA: 14.6¢
VT: 15.7¢
DE: 14.5¢
MD: 15.2¢
¢ = average retail price per kilowatt
hour for 2009
11.7¢
9.3¢ 9.4¢
8.3¢
10.0¢
9.1¢
12.0¢
9.1¢
10.3¢
11.3¢
12.4¢
15.5¢9.2¢
9.8¢
12.1¢
10.6¢
10.7¢
9.4¢
10.1¢
12.6¢
11.8¢
12.8¢
9.6¢
8.9¢
12.9¢
9.2¢
12.0¢
15.4¢
19.1¢
10.2¢ 10.2¢10.9¢
10.6¢
8.4¢
10.8¢
13.3¢
8.6¢
10.1¢
9.5¢
8.2¢
16.9¢
19.5¢
< 9¢/kWh
9¢/kWh to 10¢/kWh
10.1¢/kWh to 12¢/kWh
12.1¢/kWh to 15¢/kWh
> 15¢/kWh
Avg. NC Utility Residential Rates
NCEMPA: 13.6¢
NCMPA1: 10.2¢
Progress Energy: 9.6¢
Duke: 8.2¢
National
Average
11.3¢
18
$-
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
North Carolina Eastern Municipal Power AgencyProgress Energy North Carolina / Dominion North Carolina Power
Average Residential Electric Cost
Average Total Wholesale Power Supply Costs Local Distribution Costs
Source: Current published rate schedules; load management credits and energy efficiency discounts not included.*Seasonal rates averag ed. EC/RF 09-30-2010
Average Residential Rate Comparison
(per 1,000 kWh)
19
What are we doing about
costs and rates?
• Cost reviews
• Contract renegotiations
• Debt restructuring
• Refunding debt to lower interest rate
• New capital additions financing
• Harris settlement issues
• Demand-side management
• Internal cost controls
• Attempts to find funds for relief
• Stimulus Funds & weatherization
20
• Over the years NCEMPA has taken advantage of refunding opportunities to lower debt costs
• Weighted average interest costs have declined
– Highest rate: 12.2% in 1983
– Currently this percentage is 5.428%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
NCEMPA
1983 1995 2005 2010
Lowering Cost of Debt
21
NCEMPA Ratings Feedback
A- Stable Outlook
―upgrade reflects solid financial operations which have proven to be stable during
the current recessionary period‖
―key rating driver: Members’ continued support of a financially and operationally
sound Eastern Agency‖
A- Stable Outlook
―rating reflects gradual strengthening of financial profiles of both NCEMPA and the
32 member municipal utilities as continuing debt reduction improves margins and
limits need for base rate increases‖
Baa1 Stable Outlook
―rating incorporates the agency’s high debt ratio; above average wholesale prices
charged to participants and the credit of NCEMPA’s participants. Also factored in
are the agency’s strong take or pay contracts; declining debt service and the role
of the state Local Government Commission.‖
Moody’s
22
• Refinanced $146 million @ 3.01% interest rate
– Was at 5.5% interest rate
– Average savings: $2.68 Million/year
• Impact of recent upgrades by S&P and Fitch
– Improvement in credit quality achieved lower rate
– Savings of $345,000/year
• Total savings over term $35 Million
2010 Refunding Transaction
23
2010-2019 Wholesale Rate Plan
Effective
January 1 of …
Without Financing With Financing
Option 1 Option 2 Option 3 Option 4
2010 - - - - - - - -
2011 1.0% - - - - - -
2012 - - 1.5% - - - -
2013 - - - - - - 0.8%
2014 - - - - - - 0.8%
2015 1.0% 0.8% 1.6% 0.8%
2016 1.0% 0.8% 1.6% 0.8%
2017 1.0% 0.8% 1.6% 0.8%
2018 1.0% 0.8% 1.6% 0.8%
2019 1.0% 0.8% 1.6% 0.8%
Rate adjustment options considered by NCEMPA Rate Committee, NCEMPA Board of Commissioners and ElectriCities Board of Directors. All board and committee representation comes from the membership.
- Rate Plan Selected ($35 Million Minimum Fund Equity, Capital Additions Financing and No Rate Increase for 2010-2011) 24
Efforts to Pay off Debt
State• Legislative Meetings—Message received: with $3.5B shortfall,
no money available
– Senator Basnight, President Pro Tempore; Beth Braswell
(Sen. Basnight’s General Counsel)
– Senator Martin Nesbitt, Majority Leader
– Rep. Bill Owens, Rules Chairman
– Rep. Hugh Holliman, Majority Leader
– Rep. William Wainwright, Speaker Pro Tempore
(threatened legislation to prevent transfers)
Federal• Troubled Asset Relief Program; not available
• Congressman Butterfield: no relief from Congress26
Progress Energy’s Response
―We have not been able to devise an option
for purchasing the Power Agency’s share of
the five generating units at this time that
would serve the best interests of our
customers and shareholders and your
members.‖
Letter from Bill Johnson, CEO Progress Energy
August 26, 2010
27
Individual Participant’s
Withdrawal from the Power Agency
Three (3) General Options*
• Agency sells all of its generating assets and satisfies
its outstanding debt and obligations
• If debt exceeds proceeds from the sale, Participants must pay
the deficiency
• Participant assigns its Project Power Sales Agreement
to another Participant**
• Participant assigns output to another Participant or a
non-Participant so long as the bonds’ tax exemption is
maintained**
*Subject to certain restrictions. The foregoing is a very general overview of complex issues.
Members interested in pursuing the subjects in greater detail should contact ElectriCities.
**Must still address the Supplemental Power Sales Agreement28
Moving Forward
• Participation in the Board of Commissioners
• Continue to explore opportunities together
• Potential Actions by Participants
– Limit transfers from electric fund
– Assist customers with energy efficiency
– Improve distribution system efficiencies
– Implement programs of best practices
– Increase load management programs
• Others ?
30