New electric contract may impact city rates

By Lynn R. Parks

The city of Seaford is paying more than 25 percent more for its electricity. But Dave Thomas, director of power for the city, said that whether that will translate into higher costs for consumers is still unknown. “We are still trying to evaluate what the impact will be,” said Thomas. “We don’t know if the rates will go up or not.” City manager Dolores Slatcher said that rates to the city’s 3,400 customers “are being evaluated right now.” She added, “We might see a change pre-budget or we might see a change when the new budget goes into effect,” in July 2004. The city’s customers last saw a rate increase in June 2003. Slatcher said that that increase was in anticipation of higher costs under a new contract, “and we didn’t want that impact all at once.” The eight-year contract under which the city received electricity from Conectiv (formerly Delmarva Power and Light) expired Dec. 31. Under that contract, negotiated through the Delaware Municipal Electric Corporation, the city paid approximately $ 39 per megawatt hour. The new contract, which goes through May 2005 and which also was negotiated through the Delaware Municipal Electrical Corporation, is with Constellation Energy based in Baltimore. The city pays approximately $50 per megawatt hour, about a 28-percent jump from the previous contract. The city is still using Conectiv poles and wires to deliver electricity. The fee for that is included in the $50 per
megawatt hour that it is paying. Under the old contract, the city was able to use its generators to lower its Conectiv bill. When Conectiv was approaching peak loads, times when the utility is most vulnerable to power failures or brownouts, the city could generate electricity to ease Conectiv’s load. This “peak shaving” resulted in a credit on the city’s bill for electricity. There is no peak shaving under the new contract. To help to offset its costs, the city will at times generate electricity for sale on the regional power grid. Thomas said that workers at the city’s power plant will continually monitor how much the market is paying for electricity. When that price exceeds the cost of generating electricity - also constantly fluctuating based on the price of the diesel fuel that powers the plant - the city will put its five generators into action. The amount that the city sells its power for will show up as a credit on the bill it receives from the Delaware Municipal Electrical Corporation. Thomas said that he cannot predict how often the city will be able to sell power. “The market is extremely volatile in terms of rate,” he said. Almost as volatile is the cost of generation, based on the cost of fuel, he added. “In January, we had a lot of cold weather, and we had a lot of generation,” he added. “We will probably be generating some days every month. But we have never been in this arena. We don’t know how it will work.” Despite that uncertainty, Slatcher said that the city will figure its potential power generation into its decision on any rate increase. “We will get projections on [cold and hot] weather days and projections from DEMEC, and put that into the evaluation,” she said. Slatcher, who serves on the board of the Delaware Municipal Electrical Corporation, said that negotiations between the nine member municipalities and power suppliers lasted from six months to a year. Constellation was selected based on price as well as its reliability. With this contract up in 15 months, Slatcher said that the electrical corporation will soon start on another round of negotiations. “This is the new way of doing business in power,” she said. “It is a very fluid business.”

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