A contract that provided 17% of Danville's electricity will end this year, and its impact on customers is uncertain.
That contract, a 21.5-megawatt power block from Morgan Stanley, was adopted by the city at a trading hub in 2009, around the time of the recession, when electric rates were projected to be higher. That was also before the emergence of a large supply of natural gas on the market that drove down electric rates.
This the 6-year agreement, which began in January 2015, locked the city into rates higher than might have been available.
Whether the end of that agreement could lead to lower electric rates for the city's residential power customers is uncertain.
But at least one member of the Danville Utility Commission is doubtful customers will see much, if any, savings in their utility bills.
"The cost of power is going up everywhere," Gary Miller, Danville's vice mayor who serves as a Danville City Council representative on the commission, told the Danville Register & Bee on Monday. "I get the impression if we can just hold the line, it will be a victory."
Appalachian Power and Dominion Power are requesting rate increases from the State Corporation Commission, Miller pointed out.
The city will not know anything for sure regarding electric rates until the results of a biennial rate study in November, Danville Utilities Director Jason Grey said.
"It would be presumptuous to make that call without knowing the outcome of the study," Grey said during an interview Monday.
Officials also are not sure what the increase in transmission costs will be, he added.
"We don't know what other increases may reduce the savings," Grey said.
The residential electric rate is 0.1176 cents per kilowatt-hour, which means the average cost for a customer's use of 1,000 kilowatt hours is $117.60, Grey said.
As for the city's electric-power portfolio, that 17% gap after Dec. 31 will be partly filled by solar projects the city has in Pittsylvania County (making up about seven to eight of those percentage points). Danville Utilities will get the remainder of that share from the market, Grey said.
"The rest of it will be bought on the market for whatever remaining needs we have on the hourly market," Grey said.
Danville Utilities has solar projects operating in Kentuck and Whitmell. Another solar project in Ringgold is expected to be up and running in November, Grey said.
The city is either a buyer or seller on the market based on Danville's demand during a given hour, Grey said.
American Electric Power has increased its transmission rates to pay for upgrades to its lines and substations — by 30% in 2017 and 30% in 2018 — and that cost is passed on to Danville Utilities customers, Grey said.
"Market prices are very favorable [compared to those in 2009 during the Great Recession]," Grey said. "They have been driven down because of natural gas generation and solar renewables that have been introduced into the grid."
Most of the the remaining 83% of the city's electricity comes from projects with American Municipal Power, including hydroelectric facilities along the Ohio River, and Pinnacles and Schoolfield hydroelectric projects on the Dan River.
The city also gets power from Philpott and Kerr reservoirs.
Danville Utilities' electric budget is about $130 million a year, with the power supply making up about $90 million to $100 million of that, Grey said. The remainder includes local staff expenses and infrastructure.
During the utility commission's regular meeting Monday afternoon, member Helm Dobbins pointed out the factors that could affect power prices — increasing transmission costs, the end of the city's contract with Morgan Stanley and cheap natural gas.
"We have a number of factors moving in a number of different directions," Dobbins said.
"We have some costs that are decreasing and some that are increasing," Grey said. "We need to see how they affect each other."
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