I want to review a couple of topics that have been in the news lately and address questions members have been asking relating to these topics. They are coal ash storage remediation and electric rates.
Safe, reliable and affordable electricity is our focus every day. There is no other reason for Randolph EMC to be in existence. When it comes to your electric bill, our rates are set simply to cover the cost of doing business, not to generate a profit.
That is one of the key advantages of an electric cooperative: We are not-for-profit, and that allows us to keep our focus in the right place – on the people and the communities we serve.
Many have attributed electrification and the North American electrical grid as the world’s greatest technical accomplishment of the 20th century. When you think of the intricacies of generating and delivering electricity, all in an instant of time, the very split second you need it, at a remarkable rate of reliability, I believe their assessment is correct.
The vast majority of costs we incur as a business are directly tied to the product we deliver to your homes and businesses – electricity. But it can get more complicated when you think about the other factors that influence costs.
State and federal regulations are some of these other factors we are required to comply with. Regulations and legislation, at both the federal and state levels, enacted in the last few years to address the issue of coal ash storage and management, are being implemented now and will impact our cost of wholesale power.
Coal ash, which is considered by the EPA as a non-hazardous residue, is left over from generating electricity from coal. All states are currently addressing coal ash management because of federal requirements to do so, not just North Carolina.
Our cooperatively owned wholesale power supplier, North Carolina Electric Membership Corporation, does not own any coal plants. We do, however, purchase some of our power through contracts with Duke Energy. Through this contractual arrangement, cost related to federal and state mandates requires us to be responsible for a portion of these compliance costs.
We will not be responsible for any costs directly related to the Dan River coal ash spill that took place in 2014. The cost of cleanup from that spill will be fully borne by the shareholders of Duke Energy.
State lawmakers, in their wisdom, amended the original coal ash legislation, the Coal Ash Management Act (CAMA), in 2016 to adopt a science-based approach that preserves environmental goals while cutting millions of dollars from initial cost. The amended legislation is referred to as CAMA II.
Your Board of Directors continues to work through the details of this future cost impact to our members and are developing a sound approach to address this issue. Overall, we are in good shape and do not expect a significant impact to our members.
Currently, a credit is flowing back to the members each month on your electric bills through the Wholesale Power Cost Adjustment (WPCA). The WPCA only collects or credits the cost of wholesale power and no other operating expenses flow through this adjustment.
In preparation for the additional cost of meeting the coal ash compliance requirement, we will be reducing the WPCA credit though the remainder of 2017. In October, the credit will be reduced from $5.00/1,000 kilowatt-hours to $3.00/1,000 kilowatt-hours.
If future projections of wholesale power cost—including coal ash remediation—meet expectations, the WPCA will be reduced to zero in the beginning of 2018. Additional adjustments will be implemented based on the actual cost of wholesale power, but I will keep you updated on these adjustments.
The total amount of coal ash remediation cost assessed to Randolph EMC is currently $8 million. This expense will be spread over the next six years with a significant portion being paid in 2018 and 2019. But keep in mind, that’s in relation to our total power costs for the next five years, which is projected to be over $222 million.
I’ve isolated coal ash, but there’s a lot more to take into consideration when discussing wholesale power costs. Let me address retail rates from a broader perspective, which includes the coal ash cost.
I know you’re hearing in the news about rate increases from other electric utilities. Based on our projections today, with the caveats of assuming maintenance on our generation fleet stays on budget, fuel used to generate electricity stays at stable levels, and no new regulations are implemented to increase cost, Randolph EMC does not project a general rate increase will be needed until into the late teens to early 2020 timeframe. So, in the near future, we are not projecting a general rate increase at this time.
Your Board of Directors and employee team will continue working hard to mitigate cost increases by operating efficiently and effectively because we know any increase has an impact on your family budget. Should industry factors outside our control affect rates, we will let you know well ahead of time.
It is my job to keep you fully informed about the operations of your electric utility. As I have stated before, the news may not always be good, but you deserve to know. I have always tried to tell you like it is—the good and the bad.
Our commitment is to continue pursuing new ways to fulfill our mission of providing you with safe, reliable, environmentally responsible and affordable electricity. Your desire should be nothing less.
Dale F. Lambert
Chief Executive Officer
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