Nevada County Picayune and Gurdon Times Newspaper Archive

Electric deal offered; Council tables issue

Electric rates will be going up significantly in Prescott. The question, though, is by how much?

Representatives from the Constellation Energy Group (CEG) and R.W. Beck, a consulting group from Orlando, Fla., talked to the Prescott City Council in a special called meeting Thursday, April 4.

In the end, though, the council, at the recommendation of Prescott Mayor Howard Taylor and Larry Stockton, electric department supervisor, tabled the motion for two weeks to try and find a better option.

Paul Arsuaga, with R.W. Beck, outlined the approach taken to get the contract offer from CEG. The rate offered was more than 50 percent higher than the city currently pays. However, Prescotts contract with Entergy expired as of midnight Dec. 31, 2005.

According to Arsuaga, Prescott got good response from its request for proposals (RFPs) with 23 responses. Of those, eight companies were what is termed all requirement, which means those companies provide both the electricity and transmission. The eight were whittled down to two, with CEG having the best offer.

Arsuaga said both companies were considered major energy corporations, were investment rated and capable of doing both retail and wholesale loads having ties to traditional utility companies. Both offered five-year contracts.

Prescott, being a small customer, buys 100 percent of its electricity, purchasing about 21 megawatts a year. Prescott had entered into a three-city pact with West Memphis and Conway. Those cities signed the contract with CEG and will see an increase of about 30 percent in their electric rates. The difference, however, is West Memphis and Conway are both part owners of electric concerns and arent totally reliant on other companies for their electricity as Prescott it.

CEGs bid was for 5.8 cents per kilowatt hour (kWh) for electricity. The other bid considered was 6.6 cents per kWh. Both are more than 50 percent higher than Prescott currently pays.

There was talk about three-year contracts, instead of five-year terms, but due to the instability of the natural gas market, which the prices are based on, it was decided the five-year fixed-rate plan was the best.

Nathan Crowell, vice president of organization with CEG, gave an overview of the company. He said CEG is the oldest utility company in America, being 188 years old. It began in 1860 and is the 203rd largest utility company in the nation, being involved in all spectrums of energy.

CEG, he said, is based in Baltimore, Md., and primarily serves the Mid-Atlantic states, though it also provides electricity in the western US, as well as the Midwest.

The company recently purchased a control area from Duke Energy so it could expand to the Southern US and be on an even field with companies such as Entergy.

Crowell told the Council CEG would do everything it could to help solve the citys problems, but the prices are sensitive to todays natural gas market.

Stockton informed the panel the city is looking at a basic increase of 50 percent, which is a hefty jump. The last electric rate increase, he said, was in 1986, with the only other change in the last 20 years being a reduction of rates in 1999.

Weve been fortunate until now, he said. We saw several year with increases almost every year, until the last 20. This price is good tonight only at this price. If the contract isnt signed it wont include the price being offered now, but the other terms will be the same.

Crowell said CEG can only keep the price open for a day or two at the most because of fluctuations in the market. When the city decides, he added, it needs to call so the company can get hedge prices, which will also be fixed for the contract.

Taylor said he and Stockton talked about the situation and agreed the city should try to get better prices. However, he pointed out the city could wind up paying more than the 50 percent increase as well.

Still, he and Stockton recommended the Council table the issue until April 22 to allow them to try and get a better deal.

We have two choices, Stockton said. We can accept this contract or table it. There are options wed like to look at, but it could be more than we were presented tonight. If its not favorable we can reconsider and sign this contract.

Should the city find nothing better, CEG would have to be notified in advance to get a firm price on the cost of natural gas.

Stockton said Potlatch and Firestone are the citys two largest industrial customers, making up 70 percent of the load. A hike would hit them hard. They employ more than 800 people, and we (the city) cant absorb a 50 percent increase for them. It would put them in a bad spot.

Id hate to think what would happen if we lost one or both due to the electric rates without looking at all aspects. But we could wind up in a worse situation. There are no guarantees.

Stockton suggested the city look into purchasing part of a power plant in the future to help prevent this from happening again  if the city could afford it. He said Prescott also needs to look at building a substation.