The following is a transcript of the Jan. 20, 2025, episode of Public Power Now. Learn more about subscribing to Public Power Now at Publicpower.org/Podcasts. Some quotes may have been edited for clarity.
Paul Ciampoli
Welcome to the latest episode of Public Power Now. I'm Paul Ciampoli, APPA’s News Director.
Our guest on this episode is Fred Clark, President and CEO of Energy Southeast. At the start of 2025, Alabama Municipal Electric Authority changed its name to Energy Southeast.
Energy Southeast is a joint action agency that is a wholesale power provider for 11 public power utilities in Alabama.
Fred, thanks for joining us.
Fred Clark
Thank you very much. It's great to be with you.
Paul Ciampoli
Fred, before we discuss the rebranding news, I wanted to give you the opportunity to provide an overview of Energy Southeast and the services that Energy Southeast provides to its members.
Fred Clark
Energy Southeast is, of course, a rebranding of the Alabama Municipal Electric Authority.
Energy Southeast is an all requirements provider for 11 cities in Central and South Alabama, however, our enabling legislation enables us to provide capacity and energy to public utilities across the Southeast and beyond -- 95% of our business is capacity and energy and then of course the services from everything from safety and training to economic development, to communications, to support for our cities in industrial recruiting is all a part of what we do for our existing members.
Paul Ciampoli
I wanted to give you the opportunity to talk about the decisionmaking process behind the move to rebrand Alabama Municipal Electric Authority and change its name to Energy Southeast.
Fred Clark
Some years ago we saw an initiative to be able to grow a resource in terms of Energy Southeast, a cooperative district. We have thought about rebranding for many years, probably 10 years, as we focus on improving our image both in state and out of state.
But then through this initiative, which is the ability to do prepayments of energy using the tax code associated with that to reduce costs for public power, which led us to create a cooperative district entity which can issue bonds for the purposes of reducing energy costs.
In doing so, we've been successful thus far over the last several years of issuing some $2.1 billion in bonds by Energy Southeast, a cooperative district, and saving some $100 million over a seven-year period -- approximately $14 and a half million dollars annually -- with our first three issuances.
Through [the] beginnings of Energy Southeast, a cooperative district, [that] led us to come to strategies of providing this same benefit to public power across the country and so that was the beginning of our rebranding thoughts and efforts as it not only is supportive of our existing members, but how we can assist public power.
Paul Ciampoli
As you know, the move follows the success of recent energy initiatives and partnerships that have expanded Energy Southeast’s reach far beyond its headquarters in Montgomery, Alabama. And also Energy Southeast is broadening its services, functionally and geographically.
So against that backdrop, I want to give you the opportunity to offer additional details on those energy initiatives and partnerships, as well as the ways in which it is broadening its services.
Fred Clark
Well, we of course are very pleased with our power supply initiatives, which will have our member cities as some of the low cost providers in the Southeast and eastern half of the United States.
But in this effort, as we have talked about the prepayment initiative, we believe that that will save public power millions of dollars as they participate in this over the next several years, and so we're so excited about not only where we stand in power supply, but about the benefits of this new program.
Paul Ciampoli
For my last question, I want to take a step back and give you the opportunity, Fred, to talk about your long-term goals for Energy Southeast that you would like to achieve while you're President and CEO of Energy Southeast.
Fred Clark
We feel that there is a true need for moving down the road on the initiative of using the tax code for public power utilities to utilize in the prepayment bond initiative.
We have developed partners with investment banking firms, with financial advisors, with tax and legal counsel, with wholesale market participants, to construct prepayment projects that deliver savings and comply with municipal tax and regulatory requirements.
This Energy Southeast initiative can provide millions of dollars in energy cost savings each year. It can be fully utilized for the utility’s tax-exempt status.
Many of my colleagues in the joint action business are beginning to use purchase power agreements to meet a lower cost of capacity and energy to their existing members through this prepayment of energy, which do not impact utility operations or require additional administrative changes.
It does not impact existing power supply arrangements. It maintains total flexibility and utility future energy procurement. It simplifies financing by using Energy Southeast as a conduit, and so it doesn't impact existing contracts.
But what it allows us to do, working with such investment banks as Morgan Stanley, Goldman Sachs, RBC, which is Royal Bank of Canada, Citibank, JP Morgan and others, just to name a few that we have relationships with, we can work to reduce energy costs to public power nationwide.
The opportunity to grow this opportunity and thus save millions of dollars for public power is one of the driving issues that has led to our rebranding, has led to our creation of Energy Southeast, a cooperative district, and has led to our facilitation of this work with other investment banks focused on electric energy.
This was started, as we focused and we learned about -- of course, gas prepayment has been in the marketplace for some time -- but electric energy prepayment has not been used of late. And so it's a great opportunity for Energy Southeast to provide a service that benefits all of public power as we administer the program, working with investment banking companies and public utilities throughout the country.
Paul Ciampoli
One follow up question occurred to me, not necessarily tied to your last answer, but I mean obviously you've done a great job in terms of detailing all the benefits that are going to flow from this effort to Energy Southeast and its member communities, but if you're another joint action agency listening to this podcast are there any details in terms of the challenges that cropped up as you were making this effort?
Fred Clark
So it has taken us some five years of development working with attorneys both in New York, Washington, San Francisco, others, to establish a model by which this can be done seamlessly. For example, we have in place all the administrative support needed to do as many bond issuances as possible.
For example, if a joint action agency has a purchase power agreement with a solar developer it requires the joint action agency to get an assignment from that solar developer that assigns the energy to Energy Southeast.
And this is seamless – it's primarily paper transactions -- contractually in purpose, as well as it allows us to then sell bonds on the market using the arbitrage between tax exempt financing and taxable financing, thus achieving benefits by our tax-exempt status.
And so in doing so, although it will take a little bit of time for us to explain all of the nuances associated with this – it’s really simple. A resolution from the Joint Action Agency.
A contractual assignment of the power purchase arrangement and we can do this with all types of contracts.
Again, we have a staff that has spent five years in development. We have already had three issuances and have two bond issuances on the table in the queue to move forward this year.
And so we believe we have the opportunity to assist public power in a very large way and to give you kind of a sense of this -- so that $100 million of savings associated with that $2.1 billion in bonds, that's a savings in the energy side of an average of 10.9% of energy costs.
So that's the discount of our existing three issuances and the discount that a participant might expect and we have generally set a minimum savings of these activities of some 8% of the savings of what would have been paid.
Again, we are probing in every direction. We have just joined as a partner of Hometown Connections and am excited to be a party to working with Mark Gerken and the folks at Hometown. We of course have been working with APPA.
We've got this now in a place that is readily available for public power to get the benefits of this initiative.
Paul Ciampoli
Thanks again, Fred, for taking the time to speak with us. There is a lot of useful information from our interview today and I would love to have you back to provide an update on some of these initiatives. We could talk about other things going on at Energy Southeast -- perhaps later this year or early 2026.
Fred Clark
I would be happy to talk about power supply or any other issues. We are diving into every area from data center activities to new combined cycle gas development and so again, we appreciate APPA and appreciate all you do and we look forward to being a strong partner.
Paul Ciampoli
Thanks for listening to this episode of Public Power Now, which is produced by Julio Guerrero, Graphic and Digital Designer at APPA. I'm Paul Ciampoli and we'll be back next week with more from the world of public power.