DISCREPANCIES

ONE: ElectriCities/NCEMPA issued a press release to discuss the rate increase. The Wilson Times also published an article, with commentary from management, on the rate increase. The press release says that the increase in transmission costs are $3 million, but the article says that increase is $6 million. What’s the real number? Which number is reliable?

TWO: The same Wilson Times article provides a breakdown of the sources of the $84 million in anticipated increased spending: Source Amount Progress Energy $37 million Coal $12 million Debt Service Payments $12 million Nuclear $9 million Transmission Costs $6 million Operating Costs $5 million Replaced Investment Income $3 million But, when discussing the 2004 refinancing, the same article notes: Tim Tunis, NCEMPA’s chief financial officer, said that the agency had converted a portion of the debt from fixed-rate loans to variable-interest loans in 2004. The move was expected to save around $10.5 million a year in interest payments, he said.

So, the refinancing went from saving $10.5 million per year to costing an additional $12 million per year. That’s a swing of $22.5 million, which is more than the $12 million and $9 million projected for additional coal and nuclear fuel combined. That means the REAL ISSUE IS THE REFINANCING.

THREE: ElectriCities/NCEMPA refinanced some of its debt earlier in April (to correct the issue with variable rate debt). When it issued the debt, a ratings agency — Fitch — took the time to rate the debt so that the investor community could make an educated decision on whether to purchase the debt or not. As part of it’s ratings, Fitch reviewed NCEMPA’s financials and most likely, Fitch met with the management team. In late April, Fitch issued a press release and made the following comment: The agency believes the forecasted 7% to 9% rate increase later this year should capture working capital needs of the agency for the next two to three years. SO, did management say that to the investors, and second, if so, what’s changed between late April, when management made it’s 7% to 9% prediction, and now, when management makes its 14% request? That’s at least a 5-point swing, and a difference of at least $30 million. Why?

Rick Dew discovered that the contract for the CEO is up for renewal in August. And that cities contract with ElectriCities is up in 2010.

Board members have the duty to understand these issues before they approve them and extend the CEO contract. We need better leadership and a cap on spending.