July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
Three small towns cut costs in half by shopping for power, but major trouble lies ahead without regional grid management.
Nothing was certain back in 1995 , when three small towns in North Carolina decided to shop for cheaper electric rates. Editorials appeared in local newspapers, expressing reservations, but the town leaders pushed forward. In the municipalities of Stantonsburg, Lucama, and Black Creek, the local officials and the town boards continued to believe it could be done. They acknowledged the work that lay ahead but felt it was essential - for their citizens and their local economies - to search for relief from some of the highest electric rates in the nation.
Most industry observers mistakenly believe that North Carolina has low electric rates throughout the state. That assumption is false, however. Residents in some parts of the state pay rates as high as 11 cents and 12 cents per kilowatt-hour. That was the case in Black Creek, Lucama, and Stantonsburg, before their mayors and town leaders decided to take action. They had seen the hardship that high power bills could impose on local citizens. Elderly residents living on fixed incomes and in mobile homes were often afraid to turn on the air conditioners for fear of high power bills. Young families struggling to get by faced monthly power bills that consistently ranged from $300 to $400.
The three towns, which lay close in proximity, aggregated their electric loads and came together to work for a common goal. As the consultant for the towns, I worked with them in obtaining and evaluating bids from prospective electric power suppliers and then putting things in motion. In an article I wrote earlier for (see "Aggregating Municipal Loads: The Future is Today," Oct. 1, 1995, p. 26), I explained their unique situation - how they fell within a small group of just a few North Carolina towns that did not have a binding contract with an electric utility and thus could shop for cheaper power at the wholesale level under the terms of the Energy Policy Act of 1992. Today, almost five years and many meetings later, the dream of lower rates is more than just a vision. For these three towns, the dream is a reality. Though the road has been long, everyone involved agrees that the wait was well worth it. With their new supplier, the towns have saved over $2 million on electricity since February 1998.
Many things have happened since 1995 to make this a success story. Let me briefly outline what we did to demonstrate the many steps involved in such a project.
Small Towns Carry Clout
When we discovered that the aggregated load of the municipalities was high enough to warrant attention in the open market, we knew we were on the right track. We solicited and received five estimates from potential power suppliers offering lower rates than what the towns then paid. After failed attempts in negotiating a new contract with the then-current supplier for the three towns - the much larger city of Wilson - the town