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Small Towns Carry Clout
Fortnightly Magazine - May 1 2000

and expand the list of potential suppliers by joining an RTO.

Luckily, that challenge may now prove feasible. In recent documents filed at the FERC in connection with its proposed merger with Florida Progress Corp., CP&L has committed to joining an RTO within 90 days of the close of its merger. This news can only improve prospects for Black Creek, Lucama, Stantonsburg, and now Sharpsburg.

Other towns and governmental entities across the nation should be able to do the same thing these four towns did as customer choice begins to spread. The keys to successful aggregation include much more than simply achieving critical mass through size. Another important aspect is that municipalities should strive to increase their load factors (a measure of the load's energy use relative to its peak use). Mixing and matching energy loads is much the same as designing a portfolio. Instead of maximizing return for a given level of risk as in portfolio management, however, aggregation is maximizing load factors for a given level of risk.

Take, for example, aggregating public schools. One potential partner that comes to mind is movie theaters, which typically operate at night when the schools are closed. In such a case, a public school system with a 40 percent load factor could combine with a movie theater with a 35 percent load factor to produce a combined load factor of 50 percent or more.

Another major aspect of municipal aggregation is involvement in writing the rules for competition. To be specific, although municipalities may not like to get involved in legislative or regulatory activities, they must do so in order to ensure that the playing field is level. Municipal employees whose job activities historically have not included electric work may not consider a seemingly small issue like metering and billing to be important. These small issues can, however, mushroom into major headaches that can stop municipal aggregation.

Before Congress in 1996, the town manager in Stantonsburg told of an elderly couple in his town that had to make a decision as to whether to buy medicine or pay their power bill. Now, thanks to the efforts of the town manager and board of Stantonsburg, the average residential customer on its system is saving close to $500 per year.

Aggregation continues to offer a ray of hope for municipalities and other groups saddled with high electric costs; however, they must be given the opportunity to pursue competitive power bids. If that is done, then perhaps the storybook endings in four North Carolina towns can happen in other places throughout the nation.

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