RALEIGH — North Carolina Eastern Municipal Power Agency and Duke Energy Progress announced Monday morning that they have approved an agreement for Duke to purchase the power agency’s generating assets.
The $1.2 billion transaction is expected to eventually lower wholesale electric rates for customers in Laurinburg, Red Springs, Lumberton and 29 other municipalities in eastern North Carolina.
The current debt owed by North Carolina Eastern Municipal Power Agency members is approximately $1.9 billion. After selling the assets for $1.2 billion and liquidating certain bond reserve funds, the agency members would share responsibility for outstanding debt of approximately $480 million.
Laurinburg City Manager Charles Nichols cautioned that while wholesale rates are expected to drop, how those rates will translate into retail charges remains to be seen. According to Nichols, because each municipality owns shares of varying sizes, and thus varying degrees of the agency’s debt, any rate reduction realized by Laurinburg customers could prove vastly different than any changes in Lumberton or Red Springs.
“There’s a lot of unknowns right now,” Nichols said, adding that the actions of regulatory agencies will come into play as well.
Lumberton City Manager Wayne Horne echoed Nichols sentiments, calling the announcement “great news” while saying that the deal could take nine to 12 months.
“We feel that once all this is consummated, it will certainly mean lower rates for our consumers and we are excited about that,” Horne said. “But I also don’t want to give people a sense that it will happen automatically. It may not happen until next July.”
Negotiations between the Duke Energy and the power agency have been underway for several months.
“This is a complicated transaction that would require federal and state approvals. It won’t happen overnight,” ElectriCities CEO Graham Edwards said. “Several agencies must agree to the purchase agreement before it becomes official. We remain optimistic that we can work through that process and finalize the agreement.”
The agreement is also subject to the execution of an asset purchase agreement and a full requirements power purchase agreement between Duke Energy and the North Carolina Eastern Municipal Power Agency.
“The ElectriCities board of directors is very pleased we were able to reach an agreement with Duke Energy Progress,” Richard Hicks, ElectriCities board chairman said in a statement. “The board’s overarching goal is to strengthen public power’s future in North Carolina. Reducing NCEMPA’s debt and therefore reducing our overall costs will provide the opportunity for more competitive rates in the 32 member communities.”
“When we entered these negotiations, we knew it wasn’t feasible to expect to completely eliminate the debt by selling our assets. But this agreement has the potential to reduce our current debt by more than 70 percent,” Edwards said. “That’s a significant decrease in our costs and the savings would be directly passed along to NCEMPA members.”