ElectriCities, Treasurer Folwell anticipate better rates for Landis customers with passage of reinvestment bill

Published 12:00 am Friday, July 16, 2021

By Natalie Anderson

LANDIS — Following the passage of a bipartisan bill backed by Sen. Carl Ford, cities and towns using ElectriCities services could eventually see lower rates if they decide to reinvest nuclear decommissioning funds into a state treasurer-controlled fund.

Earlier this month, Gov. Roy Cooper signed into law Senate Bill 323, which received unanimous support in both chambers. It was filed by Sen. Paul Newton, a Republican who represents Cabarrus and Union counties, and backed by Ford, a Republican representing Rowan and Stanly counties. The bill allows money deposited into nuclear decommissioning funds established by the North Carolina Municipal Power Agency Number 1 to be reinvested into the State Treasurer’s Ancillary Governmental Participant Investment Program.

The bill is anticipated to impact 19 cities and towns using ElectriCities for electric services across the Piedmont and western North Carolina areas, including Landis. Those cities are also part of the North Carolina Municipal Power Agency Number 1, which was founded in 1976.

The agency has 75% ownership interest in the Catawba Nuclear Station 1, located in York County, South Carolina, and operated by Duke Energy. Under federal law, the U.S. Nuclear Regulatory Commission requires each operator of a nuclear facility to establish and maintain funds to decommission the facility and restore the site once the nuclear plant is closed. In 1990, the NC Municipal Power Agency Number 1 established the Catawba Unit No. 1 Decommissioning Trust Fund and the Catawba Unit No. 2 Decommissioning Trust Fund.

Similar to a pension fund, funds to decommission must be accumulated through member contributions and investment earnings to meet projected costs. The contributions are ultimately paid for by ratepayers across the 19 participating cities and towns. State Treasurer Dale Folwell explained to the Post that like a retirement or college savings plan, funds with lower fees associated with the investment ultimately result in lower wholesale rates for users. Investing in the state-maintained Ancillary Governmental Participant Investment Program, which comprises government entities outside of the North Carolina Retirement System, provides the opportunity to earn higher returns in the fund.

“The expenses of (paying into that fund) go down,” Folwell said. “The higher return you may earn means less that has to be put toward the decommissioning funds.”

Folwell said one benefit is that ElectriCities users can invest alongside “one of the lowest-costing investment options in the world.” He cites a recent CEM Benchmarking report measuring the cost-effectiveness of the state’s investments. The report compared North Carolina’s investment plans with 48 other U.S. pension plans and 14 peer states of similar-sized investment portfolios from 2015-19. The report credits North Carolina with having the lowest rates, with its total investment cost of $323.9 million across that time period lower than the median of peer states. Additionally, while North Carolina’s total investment cost was close to that of the 14 other states in 2016, North Carolina’s costs dropped by more than 30% in the three years afterwards while the national and peer average remained steady.

Folwell said the outside report is used to ensure state plans are being managed as efficiently as possible.

“The decommissioning trust fund should help all the ElectriCities upgrade infrastructure, cut rates, or both,” Ford said, adding that such money would be monitored by Folwell and State Auditor Beth Wood.

Landis currently purchases power from the NC Municipal Power Agency Number 1 at voltages of 4.2 kilovolts and 12.5 kilovolts for approximately 3,400 customers. In the 2021-22 fiscal year budget, which began July 1, the town implemented a 1-cent reduction for residential electric rates.

ElectriCities estimates the interest rate for the current decommissioning funds to be 2.2% until 2031.

“(Over) the last 10 years, interest rates have continued to decline, and as a result, NCMPA1 has lowered its earnings assumptions and increased the contribution amount,” said a spokesperson with ElectriCities. “A higher assumed rate of return would boost earnings and could result in a wholesale rate decrease, assuming current assumptions of revenue, cost and projected and actual market returns hold true.”

ElectriCities estimates a current balance of $419 million across the decommissioning funds. The state’s license for the Catawba unit project ends in 2043.

Contact reporter Natalie Anderson at 704-797-4246.

About Natalie Anderson

Natalie Anderson covers the city of Salisbury, politics and more for the Salisbury Post. She joined the staff in January 2020 after graduating from Louisiana State University, where she was editor of The Reveille newspaper. Email her at natalie.anderson@salisburypost.com or call her at 704-797-4246.

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