Waynesville sidesteps fallout from severing its wholesale power buys from Duke
Duke Energy has roped Waynesville in for another year even though the town hoped to quit buying its wholesale power from the energy giant by year’s end.
Waynesville runs its own utility, buying wholesale electricity and reselling it over its own grid to around 3,000 customers, netting about $1 million in profits a year to help fund town amenities.
Duke’s wholesale power rates have been climbing, however, prompting Waynesville to shop around for a new supplier once its contract with Duke expires at year’s end. Waynesville indeed found a better deal from Santee-Cooper, a South Carolina utility with a large nuclear fleet bringing gobs of cheap power online soon.
But when Duke learned Waynesville would no longer buy from the electricity mogul, Duke put the squeeze on Waynesville — somewhat literally.
While Waynesville can buy its wholesale power from anyone, the town will always be tethered to Duke Energy when it comes to transmission lines. Duke owns all the lines coming into Waynesville — akin to private toll roads.
“When you are not their customer, when they aren’t providing you power, that allocation and capacity they reserved for you, they will use it to serve all their other customers,” explained Ted Orrell with Utility Technology Engineers, when giving an update to the town board last week.
Waynesville had frequent flyer status on Duke’s lines when it was buying Duke’s power. But once Waynesville quit buying Duke’s power and only needed passage over the lines, Waynesville was no longer a first-class customer on the lines.
Waynesville leaders were somewhat skeptical that Duke’s line capacity was suddenly so over-burdened that it couldn’t accommodate outside power coming to Waynesville.
“Is this Duke’s way of saying ‘OK, you aren’t our customer now, so we are going to push that back, because we don’t get the power sale now?’” Alderman Wells Greeley asked. “Where we were their priority at one time, maybe we are not as big a priority now?”
Orrell said Duke does have legitimate capacity issues with its transmission lines.
“Their transmission needs to be beefed up regardless of you,” Orrell said.
But he couldn’t say for sure whether it was so dire that Duke legitimately didn’t have the capacity on its lines to bring Waynesville outside power.
Mayor Gavin Brown added that it feels a bit like Duke is putting its finger in Waynesville’s eye because it didn’t get the contract.
Legally, Duke can’t blockade the transmission lines leading to Waynesville just because Waynesville won’t buy its power from Duke. Utilities are required to grant passage to blocks of power moving from point A to point B over their lines.
But in this case, Duke claims it just doesn’t have the capacity until it completes an upgrade involving a capacitor bank at its Enka substation.
Waynesville could theoretically challenge Duke’s claim to the Federal Energy Regulatory Commission. Waynesville threatened that, but Duke capitulated in negotiations.
The town’s utility advisor, Utility Technology Engineers, struck a deal with Duke to get the capacity upgrades at the substation done next year — thus paving the way for Waynesville to buy outside power come 2017.
Santee-Cooper — the South Carolina utility that Waynesville chose as its new wholesale power supplier — will foot the bill for Duke’s upgrades upfront, and be paid back by Duke over time through discounted transmission fees. It’s in Santee-Cooper’s best interest to solve the dilemma so it can sell its power to Waynesville.
“You are saying it is not worth the fight with Duke right now?” Brown confirmed.
Orrell said with Santee-Cooper willing to do the work Duke claims is needed to get its power to Waynesville’s doorstep, Waynesville isn’t losing anything by sticking with Duke one more year.
But if Duke refuses to play ball this time next year, the town could file a complaint with the energy commission.
In the meantime, Waynesville will see a slight increase in wholesale power rates to keep buying from Duke for another year.
Duke initially tried to stick Waynesville with a 12.5 percent increase to continue as the town’s wholesale power supplier for an extra year, since the town’s long-term contract will be technically expiring.
It was a one-two punch. Duke claimed it didn’t have the capacity to wheel outside power to Waynesville, but was going to hike the rate substantially for the town to keep buying Duke’s power.
But Waynesville’s agents bargained that down to an increase of only 2 percent.
“These guys have really earned their money over the past few months,” Town Manager Marcy Onieal said of Utility Technology Engineers, which was hired to represent the town in the power marketplace.
Waynesville indeed has a savvy team in its corner as it negotiates the world of power brokering. The consulting team not only talked Duke down to a far more favorable rate increase for the next year, they also built in terms that will allow Waynesville to game the system of how it’s billed by Duke.
Duke calculates Waynesville’s monthly power bill based on loads at peak demand. But what if Waynesville could predict when loads were about to apex, and dropped its power consumption during that window?
That’s exactly what Orrell proposed.
“You receive a load signal from the power company so you can see what their loads are at any time. We can see when their loads are peak for the month and that’s when your bill would be determined,” Orrell said.
And when that’s about to happen, the town switches on diesel generators to make its own power during that window, reducing its own load during that critical window when Duke would calculate Waynesville’s bill for the month.
“You continue to watch the loads and when you see them come down you bring them off line,” Orrell said.
Needless to say, Duke doesn’t like that idea. It had been prohibited under the town’s contract.
“This was a no-no. In today’s world I guess we have enough negotiating clout,” Brown said.
Orrell gave credit to his partner, Louis Davis.
“He is the guy who got that. He was told ‘no’ also. But he came back and was told ‘no’ again,” Orrell said. “But Louis is a bulldog.”
Three representatives from Santee-Cooper made the trip to Waynesville last week to attend the town board meeting, and have been at the table throughout the negotiations with Duke over the alleged capacity conundrum.
Brown said Santee-Cooper’s willingness to step up and go to bat for Waynesville was a good sign.
“I think making the decision to go with Santee-Cooper was a great choice,” Brown said. “It is heartwarming to see you come up and take an interest in us.”