ADFITs: Not a Phantom
In his article, "Phantom Taxes: The Big Payback" (Courts and Commissions, 7/1/96, p. 41), David Wise argues that utility recovery of stranded facility costs...
the town to pass on savings of, so far, 17 percent to its citizens.
Today, the economies of all four of these towns are growing again. Stantonsburg, Black Creek, and Sharpsburg all now have housing developments under construction. In Black Creek, a major new employer has come into town - an event due in large part to lower electricity rates, at least according to the mayor. Large tracts of land with rail access and now, low electric rates, are available to manufacturers seeking building sites.
Cause for Concern - And Hope
What made these projects go?
The key factors were a desire to get the job done and the will not to bend to pressure. Duke Energy's assistance early in the game was critical, as was VEPCO's support in sticking with the towns, even though the towns lack a large-volume industrial or commercial user, and their total combined load is only in the range of about 10-15 megawatts. As a consultant, I cannot say enough about the support we have received from VEPCO. Simply put, they have earned my respect.
Not all the news is rosy, however, though recent events have added hope for the future.
I applaud the Federal Energy Regulatory Commission's recent Order 2000, but I am greatly disappointed that it did not mandate the joining of an RTO. Without an RTO that includes eastern North Carolina, I see storm clouds on the horizon for these towns and their citizens.
In our case, without regional grid management, the three towns enjoy network transmission service, but lack the capability for dynamic signaling to manage loads minute-by-minute. So far, none of the towns has incurred charges for ancillary service from CP&L. The Tri-Towns' contract with VEPCO absolves them from all risk associated with imbalance penalties. Under its contract, Sharpsburg shares the imbalance risk with VEPCO. Fortunately, VEPCO has done an outstanding job of staying within the safe harbor band in the Open Access Transmission Tariff, or OATT. That OATT ordinarily would impose charges if variations in load exceed 1.5 percent, but allows an exemption if variations never exceed 2 MW. Our contract with VEPCO will terminate in 2.5 years; after that, we might encounter trouble in finding another supplier if we still do not have the dynamic signal.
As a consultant in the wholesale power markets, it has been my observation that OATTs handle the job of buying transmission service, but long-term service is still difficult when imbalance penalties are stringent. If promoting competition is the goal of the electric industry, we must remember that metering and managing risk, such as imbalance penalties, are keys to long-term success.
In the case of these North Carolina towns, the local control area utility is Carolina Power & Light, which is not a member of any regional transmission organization (RTO). In my opinion, this lack of membership in an RTO hinders development of a fully competitive power market in eastern North Carolina. One of my top priorities for these towns is to somehow convince the state's utilities of the need to level the playing field