Contracts & Legal in Closed Session

“Executive Session - Discussion of Negotiations Incident to Proposed Contractual Arrangements and Legal Advice from PMPA’s General Counsel.” - Oct. 3, in Flat Rock, North Carolina

 

PMPA cancels Sept. 19 meeting, board members are headed to a N.C. retreat.

 

Instead of meeting this Thursday in Greer, directors of PMPA will meet Oct. 2-4 in Flat Rock, North Carolina. They will discuss contracts and legal matters in closed session on Oct. 3.

The board’s regular monthly meeting was to have been tomorrow morning (Sept. 19), but that meeting has been cancelled, according to General Manager Coleman Smoak. The only agenda listed on the PMPA website is for Oct. 3 during the board’s “2019 Planning Meeting.” This is what the representatives of 10 member-cities, including Clinton, will discuss on Oct. 3:

“Executive Session - Discussion of Negotiations Incident to Proposed Contractual Arrangements and Legal Advice from PMPA’s General Counsel.”

PMPA is the Piedmont Municipal Power Agency, the electrical supplier for Clinton, Laurens, Newberry and others. What it charges the member-cities is a major driver in what the cities charge to customers for electricity. Residential customers in Clinton have complained for three years that their rate (and, thus, their bills) is among the highest in South Carolina; the City of Clinton says electrical rates are stable.

At the board’s Aug. 22 meeting, a settlement proposal was put forth to end litigation by Newberry and others against Rock Hill and others (including Clinton) over alleged “side agreements” related to the purchase of excess electricity.

Clinton and Union buy more power than they need; Rock Hill and Greer need more power than they can buy, economically. These “side agreements” are forbidden by three clauses of the two agreements that form PMPA and regulate power rates (according to PMPA’s lawsuit answer).

On policy issues, each city has one vote. 

On power-rate issues, votes are weighted by how much each city owns of the 25% of the Catawba Nuclear Power Plant that PMPA owns. This nuclear plant supplies the electricity that PMPA sells to member-cities. Rock Hill owns the most - its vote on rate issue is weighted the highest.

Rock Hill, Greer, Clinton and Union appear to have formed a coalition that could pass a change in the 2020 rate structure -- that change would drop the power cost to Rock Hill and Greer and dramatically raise the power cost to Clinton, Laurens and Newberry.

Rock Hill’s and Greer’s position is, for many years, the cities have paid much more than their “fair share” of the operations cost of PMPA, based in Greer. 

They want the other cities to shoulder some of that burden - Scenario 1 that the board could vote on would increase Clinton’s cost of power from PMPA by 30%.

To mitigate this increase, the Newberry lawsuit alleges, Clinton and Greer reached a “side agreement” whereby Greer would buy Clinton’s excess power (Rock Hill agreed to buy Union’s excess power).

When it became clear that the Rock Hill coalition was forming, Newberry (lead plaintiff), Laurens, Gaffney and Easley filed a lawsuit against Rock Hill, Greer, Clinton, Union and PMPA itself.

All the parties that were sued have denied wrongdoing, and have claimed SC courts do not have juridiction in this matter.

For the first time, at the August meeting, a settlement was proposed. 

PMPA will pay Rock Hill and Greer anywhere from $50 million to $100 million to reimburse the cities for their “more than fair share” of operating expenses over the years. The money would come from the $90 million in reserves that PMPA holds.

Apparently, these proposed agreements (in the form of contracts) and the legal advice on how the lawsuit would be dismissed are what the board members will discuss behind closed doors Oct. 3.

Mayor Bob McLean is Clinton’s representative on the PMPA board. City Manager Bill Ed Cannon is Clinton’s alternate. Cannon spoke in favor of the settlement at the Aug. 22 meeting. 

He said, “I have been accused of backroom dealing. Why don’t we address all these issues now rather than wait until Clinton has to file bankruptcy because it cannot afford these electrical rates. I know Rock Hill and Greer have been screwed in all this. Why (have an agreement) now and again in 2029? We’re all married together until 2035.”

2029 refers to when Rock Hill, Greer and Westminster have declared they will leave the all-requirements level of service provided by PMPA (rates will increase by 13% for the 7 remaining member-cities, a consultant has said).

2035 refers to when PMPA debt is paid off – unless the agency refinances its debt (at a much lower interest rate) until 2043. Some board members have expressed concerns that litigation will scare off potential investors for the refinanced debt.

The re-fi could lower PMPA’s overall rate by 6% to member-cities.

Cannon referred to electric rates that Clinton “cannot afford” – a plan advanced by Rock Hill for 2020 could have Clinton paying 30% more for PMPA electricity (Laurens and Newberry would pay more, too). It’s 1 of 5 scenarios for the 2020 rate structure – the others leave Clinton’s rate basically the same as it is now.

Rock Hill and Greer have said in no uncertain terms that “as it is now” is unacceptable.

If the PMPA board does nothing, the litigation appears headed for arbitration after Jan. 1, 2020.

 

 

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