Background Presentation on Electricities shared at Summer 2013 NCLGBA Conference (July 11, 2013)

1. ElectriCities, NCEMPA &
NCMPA1 Background
July 2013
Summer 2013 NCLGBA Conference

2. History: Why ElectriCities Was Formed
Governance
Business
Current Issues
The Value of Public Power
Questions
Agenda
2

3. A Look Back at History
3
 With energy demand outpacing supply, utilities
couldn‟t guarantee reliable long-term power supply
– Rationing of power predicted
– Electric costs steadily increasing
 Cities feared negative impact on economic
development
The Impact of the 1970s Energy Crisis:
Poor Reliability, Rising Costs Created Dire Situation

4. “For the first time in modern North Carolina, you‟re seeing
the two largest power companies in the state not being
able to say to an industrial prospect, „Yes, come any time
you want and anywhere you want, and we‟ll have power
for you.‟”
Sherwood Smith,
Chairman and CEO, CP&L
October 1981
Business North Carolina
A Look Back at History
4

5. “We were not able in 1974 to sell any bonds at any price,
under any conditions whatsoever. We were desperate for
cash to meet the payroll... We converted everything we
could to cash. We converted uranium to cash. We sold our
office buildings and leased them back.”
Bill Lee, Chairman and CEO, Duke Power Company
July 9, 1985
Testimony in Rate Hearing
A Look Back at History
5

6. The Impact of the 1970s Energy Crisis:
Rising Costs
 Wholesale rates were volatile and unpredictable
 Energy rates skyrocketed across the U.S.
 From 1970 to 1979
– CP&L wholesale rates increased 243%
– Duke wholesale rates increased 262%
A Look Back at History
6

7. Energy Crisis Brought Together Utilities and Cities
 Cities wanted greater reliability and control over costs
 Utilities needed help to finance new power plants
The Best Solution At The Time:
Cities Granted Permission to Own Generation
 Legislation passed unanimously in 1975
 Constitutional Amendment passed in 1977
 NCMPA1 purchased ownership in Catawba in 1978
 NCEMPA purchased ownership in 5 CP&L plants in
1982
Who Supported the Idea?
 Governor, Legislators, City Officials, Voters
The Power Agency is Formed
7

8. Three Mile Island Changed Everything
8
March 28, 1979

9. Increased government regulations
Construction delays
Significant cost overruns
Cost of NCMPA1
Share of Catawba
* Source: NCMPA1 “Summary of Events Affecting Current and Projected Power Costs and
Responses Thereto” (July 5, 1988); original cost projected to be $0.5 billion.
The Catawba Nuclear Plant Faced:
Three Mile Island Changed Everything
9

10. 10
Cost to build Catawba was almost three
times higher than projected
NCMPA1 was left with high debt, made
worse by record high interest rates and
a decline in projected load growth
NCMPA1 is legally bound to repay the
bonds; no cancellation opportunities
The Impact on NCMPA1:
Three Mile Island Changed Everything

11.  Increased government regulations
 Construction delays
 Significant cost overruns
 Plans for 3 additional units cancelled
Cost of NCEMPA
Share of Shearon
Harris
 * $3.6B includes construction cost, fuel, interest during construction, deferred cost and
cancellation cost. Original cost estimate: $1.4B.
 Sources: Research Triangle Institute “Policy Options for North Carolina’s Municipal Power
Agencies” (March 1999) and ElectriCities “Report to the Study Commission on the Future of
Electric Service in North Carolina” (October 1999).
The Shearon Harris Nuclear Plant Faced:
Three Mile Island Changed Everything
11

12. 10
• The cost to build the Shearon Harris
plant* was more than twice as
expensive as projected
• NCEMPA was left with high debt, made
worse by record-high interest rates and
a decline in projected load growth
• NCEMPA is legally bound to repay the
bonds; no cancellation opportunities
* Cost per kilowatt
The Impact on NCEMPA:
Three Mile Island Changed Everything

13. Catawba Nuclear Station
13
 The Catawba plant, which consists of
two identical units, is jointly owned by
NCMPA1, Duke, Piedmont Municipal
Power Agency (S.C.) and North
Carolina Electric Membership
Corporation
 NCMPA1 owns 75% of Catawba Unit 2
 Through contractual arrangements,
the owners share both units at the
plant
 NCMPA1 owns the largest share of the
Catawba Plant
– NCMPA1 37.500%
– NCEMC 30.754%
– Duke 19.246%
– PMPA 12.500%
Nuclear Regulatory Commission issued license
extensions December 5, 2003 for both Catawba and
McGuire Nuclear Plants
License Expiration
Catawba 1 12/5/43
Catawba 2 12/5/43
McGuire 1 6/12/41
McGuire 2 3/3/43

14. 14
NCEMPA Jointly Owned Units
Mayo Plant
16.17% Ownership
(117.6 MW)
Roxboro Unit 4
12.94% Ownership
(90.3 MW)
Brunswick Plant
18.33% Ownership
(342.7 MW)
U1 License Expires:
9/8/2036
U2 License Expires:
12/27/2034
Harris Plant
16.17% Ownership
(150.0 MW)
License Expires:
10/24/2046

15. History
Governance: How ElectriCities Operates
Business
Current Issues
The Value of Public Power
Questions
Agenda
15

16. Governance Structure
16
NCMPA1 Board of Commissioners
Primary Responsibilities
 Accepts/rejects wholesale rates
 Adopts NCMPA1 budgets
 Concurrence with debt issuance
ElectriCities Staff
Primary Responsibilities
 Provides management services
to the Power Agencies
 Provides other joint municipal
assistance services to 86 cities in
NC, SC and VA
ElectriCities Board of Directors
Primary Responsibilities
 Sets policy and strategic direction
 Holds management accountable for day-to-
day operations of the Power Agencies
 Reviews and approves ElectriCities budget
 Adopts wholesale rates sufficient to cover
Power Agencies’ debt and expenses subject
to rejection by the Board of Commissioners
Trade
Organization
GovernmentRelations
Member Services
Safety & Training
Economic Development
NCEMPA Board of Commissioners
Primary Responsibilities
• Accepts/rejects wholesale rates
• Adopts NCEMPA budgets
• Concurrence with debt issuance

17. 17
Monroe
Donald D. Mitchell
Greg Demko
Freddie B. Gordon
Morganton
Dan Brown
Brooks Kirby
Sally W. Sandy
Newton
Todd Clark
Wayne Dellinger
Douglas S. Wesson
Pineville
Mayor George Fowler
Vacant
Shelby
Mayor O. Stanhope Anthony, III
J. Richard Howell, Jr.
Brad R. Cornwell
Statesville
Mayor Constantine H. Kutteh
F. Kent Houpe
Larry Pressley
Mayor Constantine H. Kutteh
Secretary-Treasurer
Statesville
Albemarle
Raymond I. Allen
Jack F. Neel
Bostic
Vacant
Vacant
Cherryville
Mayor Bob Austell
Brian Dalton
Cornelius
Chuck Travis
David Gilroy
Drexel
Sherri Bradshaw
Carroll Franklin
Gastonia
Porter L. McAteer
Jim Gallagher
Paul Jakubczak
Granite Falls
Mayor Barry C. Hayes
Jerry T. Church
Frank Mackie
High Point
Strib Boynton
Mayor Bernita Sims
J. William McGuinn, Jr.
Huntersville
Gregory H. Ferguson
Sarah McAulay
Landis
W. Steve Rowland
D. Reed Linn
Lexington
John T. Walser, Jr.
Mayor Newell Clark
L. Wayne Alley
Lincolnton
Stephen H. Peeler
Mayor John O. Gilleland, Jr.
Jeff B. Emory
Maiden
Billy R. Price
Marcus C. Midgett
NCMPA1 Commissioners and Alternate Commissioners;
Alternate Commissioners' names appear in italics. (as of 1/29/13)
NCMPA1 Board of Commissioners
Appointed by Local Governing Board
NCMPA1 Officers
Jack F. Neel
Chairman
Albemarle
Mayor Barry C. Hayes
Vice Chairman
Granite Falls

18. 18
Kinston
Vacant
Tony Sears
Rhonda F. Barwick
La Grange
John P. Craft
Larry Gladney
Bobby Wooten
Laurinburg
Harold W. Haywood
Curtis B. Leak
Louisburg
Ray Patterson
Tony L. King
Mark R. Warren
Lumberton
Harry L. Ivey
Leon Maynor
T. Wayne Horne
New Bern
Jonathan Rynne
Dennis K. Bucher
Mayor Lee W. Bettis, Jr.
Donald I. Evans
Secretary-Treasurer, Wilson
Apex
Bruce A. Radford
J. Michael Wilson
R. Lee Smiley
Ayden
Adam G. Mitchell
Mayor Stephen W. Tripp
Belhaven
Mayor Adam W. O’Neal
Dr. Guinn Leverett
Benson
Matthew R. Zapp
Braston A. Newton
Clayton
Robert J. Ahlert
Mayor Jody L. McLeod
Edenton
Anne-Marie Knighton
Willis Privott
Glenn Andersen
Elizabeth City
Richard Olson
Mayor Joseph Peel
Farmville
Richard N. Hicks
David P. Hodgkins
Brian Shackleford
Fremont
Leon V. Mooring
Kerry McDuffie
Harold Cuddington
Greenville Utilities Comm.
Virginia D. Hardy, PhD
John F. Minges, III
Anthony C. (Tony) Cannon
Hamilton
Herbert L. Everett
Mayor Donald G. Matthews, III
Hertford
Brandon Shoaf
Mayor Horace C. Reid, Jr.
Hobgood
Vacant
Danny Ellis
Hookerton
Mayor Robert E. Taylor
April H. Baker
Danny Taylor
NCEMPA Commissioners and Alternate Commissioners; Alternate Commissioners' names appear in italics.
NCEMPA Officers
Mayor Vivian A. Jones
Chair, Wake Forest
Matthew R. Zapp
Vice Chair, Benson
Pikeville
Lyman G. Galloway
Robert Hooks
Kathie P. Fields
Red Springs
Mayor John M. McNeill
David Shook
Edward Henderson
Robersonville
Elizabeth W. Jenkins
Stacy Scott
John David Jenkins
Rocky Mount
Andre D. Knight
Charles W. Penny
Richard H. Worsinger
Scotland Neck
Mayor Leonard Bunting
Nancy Jackson
Selma
Richard Douglas
Donald Baker
Mayor Cheryl L. Oliver
Smithfield
Paul Sabiston
C. Earl Botkin
Southport
Paul D. Fisher
James F. (Jim) Powell
Tarboro
Rick Page
Alan Thornton
Robert L. (Buddy) Harrison
Wake Forest
Mayor Vivian A. Jones
Mark S. Williams
Washington
Doug Mercer
Keith Hardt
Josh Kay
Wilson
Donald I. Evans
Dathan C. Shows
Grant W. Goings
NCEMPA Board of Commissioners
Appointed by Local Governing Board
(as of March 2013)

19. History
Governance
Business
Current Issues
The Value of Public Power
Questions
Agenda
19

20. NCMPA1 Power Supply
20
Electricity Supply
Project Sales Agreement
• Catawba Nuclear Unit 1 & 2
• McGuire Nuclear Unit 1 & 2 (exchange)
~ 96%
~ 4%
Supplemental
Power Supply
Electricity Sales
Sales to Member Cities
~ 75%
~ 25%Sales to Utilities
(Surplus Sales)

21. NCMPA1 – 2013 Budget Revenues
21
2013 Budget $564M
Sales to
Participants, $420
.4M, 74.5%
Sales to
Utilities, $52M, 9.2
%
McGuire
Exchange
Entitlement, $42.1
M, 7.5%
Excess R&C Fund
Valuation/Other
Income, $19.2M, 3.
4%
Investment
Income, $7.9M, 1.4
%
Fund Equity
Withdrawal/
(Deposit), $22.5M, 4
.0%

22. 22
NCMPA1 – 2013 Budget Expenses
2013 Budget $564M
Power Agency Services Details
Management Services $ 10.1 (1.8% of total budget)
Outside Consultants $ 1.4 (0.2% of total budget)
Other PAS $ 3.2 (0.6% of total budget)
Total $14.7 M
O&M
, $110.0M, 19.5
%
Fuel
, $66.1M, 11.7
%
McGuire
Exchange
Entitlement, $
39.1M, 6.9%
Purchased
Power &
Transmission,
$40.4M, 7.2%
Duke/Catawba
A&G, $37.0M,
6.6%
Power Agency
Services, $14.
7M, 2.6%
Taxes, $37.9M
, 6.7%
Debt
Service, $192.6
M,
34.1%
R&C
Fund, $19.2M,
3.4%
Decommissioning
Fund, $7.4M,
1.3%

23. $0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Historical Projected $154M Capital Additions (2012 - 2014) $121M Forecasted Capital Additions (2015 - 2017)
$Millions
Catawba
Retirement
$1.3B reduction since
high in 1993
Outstanding Debt January 2013 = $1,433,090,000
Weighted Average Interest Cost = 3.36%
Outstanding Principal by Year Historical and Projected
23

24. Wholesale Rate Plan
24
* All increases shown are assumed
effective July 1 of each year.
Year
Projected
NCMPA1
Increase*
2013 5.0%
2014 5.0%
2015 5.0%
2016 2.5%
2017 - -
2018 - -
2019 - -
* Duke values are projected by NCMPA1
*

25. Regional Electric Rate Increases
25
33.77%
36.77% 38.67%
50.83% 51.37%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
PercentageIncrease
Cumulative 10 Year Electric Rate Increases
2004-2013*
NCMPA1 Wholesale NCEMPA Wholesale Duke Retail Progress Retail Dominion Retail
* 2013 increases filed pending approval for Duke and Progress

26. AR Rate Levels – Projections Since 2007
26

27. Comparing 2007 Rate Plan to 2012 Rate Plan
Summary of Higher Costs & Revenue Loss
27

28.  Cost reviews/audits of contracts and bills
 Debt restructuring
 Refunding debt to lower interest rate
 New Capital Additions financing
 Seek opportunities to maximize off-system
sales revenues
 Internal cost controls
28
What Are We Doing About Costs And Rates?

29. NCEMPA Power Supply
29
Sources of Electricity (2012 Energy)
NCEMPA’s ownership of jointly-owned units
Remaining needs purchased
through a long-term agreement with
Progress Energy
71.6%
28.4%

30. NCEMPA – 2013 Budget Expenses
30
2013 Budget $767
(all dollars in millions)
Power Agency Services Details
Management Services $ 8.3 (1.08% of total budget)
Outside Consultants $ 1.5 (0.20% of total budget)
Other PAS $ 1.4 (0.18% of total budget)
Total $11.2
O & M
$96.6M
12.6%
Fuel
$76.3M
10.0%
Supplemental
Power Supply
$194.9M
25.4%
DEC Allocated A&G
$30.0M
3.9%
Power Agency
Services
$11.2M
1.5%
Taxes
$25.6M
3.3%
Debt Service
$261.4M
34.1%
Power Agency
Generation
$12.6M
1.6%
Special Funds
Deposits
$58.2M
7.6%

31. $0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Historical Projected $87M Capital Additions (2012 - 2013) $201M Forecasted Capital Additions (2014 - 2019)
$Millions
Harris
Retirement
Brunswick 1 & 2
Retirement
$1.6 Billion reduction
since high in 1993
Outstanding Debt January 2013 = $2,025,720,000
Weighted Average Interest Cost = 5.24%
NCEMPA – Outstanding Debt
31

32. 2012-2022 Wholesale Rate Plan
No rate increases projected until 2015
3% increases 2015 - 2020
32

33. History
Governance
Business
Current Issues
The Value of Public Power
Questions
Agenda
33

34.  Federal Regulations / Legislation
– EPA
– Tax-exempt Financing
 Economy
 State Legislation
– HB 295 REPS Repeal
• SB 720 NCEMPA required to negotiate sale of
assets with Duke Energy
– SB 635 Limitation of Transmission Construction to
Incumbent Utilities
Current Issues
34

35.  Pole Attachments
 NC Supreme Court Ruling on Duke‟s 2012 Rate
Increase
 Post Merger Report
Current Issues (Continued)
35

36. 36
Duke / Progress Energy Merger Benefits
• 20 MW distributed generation
(owned by NCEMPA)
• Increased capacity for load
side generation for cities and
their customers
• 5 year reduction in certain fees
and expenses provides
protection for merger related
costs
• Most benefits continue through
2032

37. Agenda
37
History
Governance
Business
Current Issues
The Value of Public Power
Questions

38.  To serve the needs of public power
communities through collective
strength, wisdom and action while promoting
a more successful future for our citizens
Our Purpose:
The Value of ElectriCities
38

39. The Value of ElectriCities
39
ElectriCities
provides benefits in
5 broad categories:
 Power Supply
 Load and Demand Side
Management
 Contract Administration
 Finance
 Services

40.  Reliability
 Economic Development
 Services
The Value of ElectriCities
40

41. 41
Industry data shows that ElectriCities communities provide
more reliable power and restore power more quickly than
investor-owned utilities
Average Outages: ElectriCities: 0.923 outages per
year, Progress Energy: 1.69 outages per year
Average Restoration Time: ElectriCities: 67.07
minutes, Progress Energy: 85.21 minutes
Public Power Reliability

42. Public Power Reliability
42
• Industry data shows that ElectriCities
communities provide more reliable
power and restore power more quickly
than investor-owned utilities
• Economist estimates the value of this
increased reliability to the customers is
between $25-$30 million per year
0.923 1.03
1.69
0
0.5
1
1.5
2
ElectriCities Duke Energy Progress Energy
Average Outages per Year
67.07
155.34
85.21
0
50
100
150
200
ElectriCities Duke Energy Progress Energy
Average Restoration Time
(in minutes)

43. Service to Members
– Strategic Target Marketing
– Customized City Projects
– Marketing / Collateral
– Advertising
– Grant Opportunities
– Industrial Recruitment
– Retail / Commercial Recruitment
Economic Development
43

44. 44
Economic Development
Apex
• Site review with major grocery chain developer
• Site review with national full service fitness center
Louisburg
• Palviz North America – 15 jobs; $2.75M investment
• Project Crabtree – Discount grocery store in process
• Collateral material for Louisburg Industrial Park
Wake Forest
• Site review with major grocery chain developer
• Site review with national full service fitness center
• Project Zeiss expansion
Clayton
• Caterpillar expansion – 199 jobs; $33M investment

45. 45
Economic Development
Hamilton
• Smart Communities Grant (2012) - Downtown
Redevelopment
Robersonville
• Smart Communities Grant (2012) – Signage
• Customized City Project – Meeting Scheduled
Scotland Neck
• Smart Communities Grant (2012) - Façade Upgrades
Tarboro
• Customized City Project – Quality of Life brochure
• Smart Communities Grant (2012) – Industrial Park
Signage
• Project Dellen – Site submitted to Department of
Commerce
Hobgood
• Public Power Promotional Program (P4) –
Fire retardant shirts for employees

46. Economic Development – Rocky Mount
• Smart Communities Grant (2013) $4,000 for website
update / economic development page
• Working with Alan Matthews (Chamber ED) on
promoting retail site(s) for grocery store
– Met with developer at ElectriCities booth during
International Council of Shopping Centers in May
• Continue to market available properties with
Carolina‟s Gateway Partnership
– Project Blossom (Food Processing)
– Project RAM (wovens)
46

47.  Safety & Training
 Legal and Regulatory Compliance
 Communications
 Legislative Issues
 Utility Operations
 Business Operations
 Customer Service Support
 Economic Development
 Commercial & Industrial Customer Initiatives
 Residential Customer Initiatives
ElectriCities Services
47

48. 48
Services to Help Control Power Costs
• Free Energy Audits
• Load Management Switches
• Distribution System Improvements
• Load-Side Generation
Services

49. 49
Services Provided through ElectriCities
Power
Agency
Non-
Power Agency
Annual Conference Yes Yes
Member Relations and Education Yes Yes
Emergency Assistance Program Yes Yes
Statewide Service Contracts and Purchasing Yes Yes
Business Operations Support (Customer Service Workshops and Performance
Indicators)
Yes Yes
Distribution System Operations Support (Operation Standards Team and Best
Practices)
Yes Yes
Career Development Programs Yes Yes
ElectriCities Schools Yes Yes
ElectriCities and NCAMES Teams Yes Yes
Safety & Training Support (Crew Audits, Safety Meetings, Accident Investigations,
OSHA & NESC Support)
Yes Yes
Territorial Support Yes Yes
Storm Communications Yes Yes
Regional / State Support Yes Yes
Retail Billing Assistance Yes Yes
Remote Read / Billing Yes Yes

50. 50
Services Provided through ElectriCities
Power
Agency
Non-
Power Agency
Public Relations - Communications and Media Yes No*
Customer Communication Pieces (Bill Inserts and Videos) Yes No*
Wholesale Rates and Billing Yes No*
Demand Side Management (Load Management) Yes No*
Appliance and Voltage Control Yes No*
Innovative Rates Yes No*
Load Management Notification Yes No*
Retail Rate Program Yes No*
Power Cost Yes No*
Distribution System Losses Survey Yes No*
Business Development Services (C/I Energy Audits, Key Accounts) Yes No*
Load Growth Initiatives Yes No*
Retail /Commercial Development Yes No*
No* - These programs may be available at an additional cost billed directly to the city.

51. 51
Services Provided through ElectriCities
Power
Agency
Non-
Power Agency
Economic Development Support - ( Aerial Photography, Territorial Legal Advice,
Prime Power Park)
Yes No*
Member Design and Communication Projects Yes No*
Economic Development Support Yes No*
NERC Services Yes No*
REPS EE Programs Yes No
Residential Energy Services Yes No
Generator Interconnection Yes No
Renewables Yes No
Load Forecasting Yes No
Rebate Studies Yes No
Peak Shaving Generation Yes No
No* - These programs may be available at an additional cost billed directly to the city.

52. 52
(as of January 2013)
NCEMPA Participant Debt Responsibility

53.  Your feedback helps us:
– Focus on those issues of importance to you
– Deliver the best mix of programs and services
– Continue to improve the value of your membership
 Member Satisfaction Rating of 92%
– Responses from Mayors, Board of Commissioners, City
Managers, Utility Directors, Finance Directors, City Staff
– Rates ElectriCities staff on Performance, Customer
Service, Professionalism, Responsiveness, Accuracy
Service Excellence is our goal
2012 Member Satisfaction Survey
53

54. Stay involved: Keep up with ElectriCities news
– Twitter: @ElectriCitiesNC, @NCEnergyTips
– YouTube: NC Public Power channel
– Facebook: ElectriCities of NC
All links are on the ElectriCities.com home page
Stay Connected
54

55. Contact Information
Graham Edwards
CEO, ElectriCities of NC, Inc.
Office: 919-760-6330
Cell: 843-647-8355
Email: gedwards@electricities.org
Communications
55

56. 56
Questions?