Electricity Markets

Agreement expected to save Fayetteville PWC more than $300 mil

North Carolina public power utility Fayetteville Public Works Commission (PWC) on Nov. 13 said that it has reached an agreement with Duke Energy Progress (DEP) that is expected to result in over $300 million of savings for PWC customers and modifies the current wholesale power supply agreement between PWC and DEP that could have ended in 2024. 

By amending the agreement, it provides both savings and long-term power supply stability for the next 22 years, PWC said.

The parties expect to execute the agreement by the end of November and submit it to the Federal Energy Regulatory Commission for approval by February 2020.

The current contract began in 2012 and runs through June 2042, with a PWC option to end the agreement effective June 2024.

Through re-negotiations, the contract amendment is expected to save PWC $313 million (net present value savings) compared to the current agreement including $33 million savings prior to 2024 when the terms of the current agreement end.  

Over the past two years, the commission has been examining various options and alternatives for PWC’s power supply after 2024. The amendment to the DEP contract is the only one that provides PWC and its customers savings before July 2024, PWC noted.  

“Long term power supply is the most significant decision PWC has to make because it is the number-one factor in providing our customers reliable electric service at a reasonable cost,” said David Trego, PWC CEO/General Manager. “Purchased energy is our largest single expense for PWC and there are many factors and risks, in addition to cost, that had to be taken into consideration.”

When compared to other options, DEP offered the best combination of competitive rates and low risks, including PWC maintaining its native load status, the public power utility said. Native load status is the highest level of delivery reliability, giving PWC the same high service priority as Duke’s own retail customers, it said. 

In addition to savings and reliability, the amended agreement allows PWC to promote additional conservation and demand side management programs, not allowed in the current agreement.

 Other benefits include no impact on PWC’s bond rating, minimal fuel price risk because of Duke Energy’s generation fuel diversity and no counterparty risk because DEP owns their generation assets.

The terms of the amended agreement run through 2042 and PWC has the option to end the contract in 2032 with a three-year notice. 

In a separate agreement, DEP agreed to extend its contract to lease PWC’s Butler-Warner Generation Plant. 

Under the existing contract, Duke Energy dispatches PWC to operate the plant as needed for $12 million annually. New terms extend the contract through June 2024 for an additional $5 million in PWC revenue. PWC may be able to achieve additional savings beyond 2024 if operational requirements are met. 

PWC provides electric service to more than 82,000 customers in the Fayetteville/Cumberland County area of North Carolina.  PWC is the largest public power provider in the state and the 36th largest in the United States.