DPU, Duke Electricity deal faces hurdle

ORANGEBURG, NORTH CAROLINA - With the Department of Public Utilities' new half-billion-dollar electric supply contract with Duke Energy on the line, the city of Orangeburg has a lot riding on a pending ruling from the North Carolina Utilities Commission.

Charlotte, N.C.-based Duke Energy, which signed a historic $500 million deal with Orangeburg in May, is seeking permission from the Utilities Commission to sell electricity to Orangeburg. Oral arguments in the case, which had been set for October 14, have been postponed until November 5.

"Orangeburg and Duke both agreed prior to the signing of the contract that we'd go to the North Carolina Utilities Commission and ask for a ruling," DPU Manager Fred Boatwright said. "We're partners in seeking the ruling." DPU negotiated the precedent-setting Duke Energy contract, which promises a savings of $10 million a year over the next decade.

The measure, which was unanimously authorized by Orangeburg City Council, marks the first time DPU has purchased the bulk of its electric energy from a source other than SCE&G or its predecessor in almost 90 years.

"This is big news for us," Boatwright said at the time the contract was approved. "It's a wonderful deal for our rate payers, and our job is to get the lowest rate we can.... This gives me great satisfaction that for the next 10 years we have a good deal in place, especially in the energy market we have today." But, first comes the N.C. Utilities Commission, which has raised objections to the deal.

With another month before legal objections are to be filed, Public Staff (the consumer affairs arm of the Utilities Commission) attorney Gisele Rankin said the major objection is the effect the contract would have on other ratepayers. The "average system cost" proposed by Duke under the contract, she said, would cause Duke's other ratepayers to see an increase.

While Public Staff has "intervened" and is taking a negative approach, Boatwright said they're just doing what they're supposed to do. "They're supposed to protect the retail customers of North Carolina. We expected that," he said.

"When they hear all the testimony, they'll realize it won't be detrimental to the ratepayers."

That includes, Boatwright said, the argument that retail customers of Duke Energy would be stuck paying for needed new power plants, if an outside customer, like DPU, didn't renew its contract.

"We're prepared to argue that won't happen," Boatwright said. "It doesn't necessarily mean we won't leave, but we won't leave the rate payers stranded in North Carolina." According to Boatwright, the N.C. Utilities Commission can make one of three rulings. "It can rule in our favor. It can rule against us or it can say they're not going to rule at all and wait until Duke Energy files its next rate increase and see if our 190 megawatts (contract) had an impact that would substantially affect their ratepayers," he said. "I don't know."

There is, however, a contingency plan, that was included in the signed contract with Duke Energy, the DPU manager said. It's called the materially adverse ruling clause.

Should there be such a binding "materially adverse ruling," he said DPU will "continue to buy from Duke for 24 months while we sought to renegotiate the contract or get another contract with a different company."

"It's important to say the structure of this contract is fully in line with all of the FERC (Federal Energy Regulatory Commission) rules," he said. "It's the national policy that wholesale electric rates be competitive and open, and that's why we're doing what we're doing."