PMPA Looking Ahead: Lawsuit Settlement Talks Are Proposed.
To avoid lawsuits and having to go before an arbitrator after the first of the year, the PMPA Board on Thursday began discussing a settlement agreement.
It is part of the planning for after 2029, when Rock Hill, Greer and Westminster will no longer be power-purchasing members of the Piedmont Municipal Power Authority, but these cities will remain as board members. When that happens, the remaining members likely will be charged 13% more for electricity, in order to operate PMPA.
The board has faced 3 issues: its rate structure for 2020, its rate structure for 2029 when there will be 7 members instead of the current 10, and who the board chairman will be. Chairman Joel Ledbetter of Easley survived an ouster vote last month, on a 5-5 vote (motion failed on a tie), on a motion made by Rock Hill.
The move is emblematic of the split on the board – Rock Hill, Greer, Clinton, Union and Westminster on one side; Newberry, Laurens, Easley, Gaffney and Abbeville on the other side. Most of the Newberry group has filed a lawsuit against most of the Rock Hill group, and PMPA itself, alleging “side agreements” among 4 parties: Clinton, Union, Rock Hill and Greer. These 4 parties, and PMPA itself, have denied wrongdoing, and have said South Carolina civil courts do not have jurisdiction in this matter.
Rock Hill and Greer threatened to sue all the other members of PMPA if the board did not adopt a 2020 rate structure more to their liking.
To settle all pending legal questions, the PMPA Board conducting a “work session”-style meeting at the agency’s Greer headquarters considered a settlement. Although nothing was decided, the idea was to give Rock Hill and Greer $50 million in electrical rate credits to settle the two cities’ claims that, for many years, they have paid more than their fair share to operate PMPA.
Clinton alternate board member, City Manager Bill Ed Cannon, said, “I have been accused of backroom dealing. Why don’t we address all these issues now rather than wait until Clinton has to file bankruptcy because it cannot afford these electrical rates. I know Rock Hill and Greer have been screwed in all this. Why (have an agreement) now and again in 2029? We’re all married together until 2035.”
2029 refers to when Rock Hill, Greer and Westminster have declared they will leave the all-requirements level of service provided by PMPA.
2035 refers to when PMPA debt is paid off – unless the agency refinances its debt (at a much lower interest rate) until 2043. Some board members have expressed concerns that a change in the chairman, and unsolved litigation, will scare off potential investors for the refinanced debt – which could lower PMPA’s overall rate by 6% to member-cities.
Cannon referred to electric rates that Clinton “cannot afford” – a plan advanced by Rock Hill for 2020 could have Clinton paying 30% more for PMPA electricity (Laurens and Newberry would pay more, too). It’s 1 of 5 scenarios for the 2020 rate structure – the others leave Clinton’s rate basically the same as it is now.
Rock Hill and Greer have said in no uncertain terms that “as it is now” is unacceptable.
To settle the pending litigation, the PMPA Board could decide to pay Rock Hill and Greer a sum of money – Greer mentioned $50 million, Rock Hill said its costs are closer to $100 million – from cash-on-hand available to PMPA right now.
It would not be cash – it would be a credit against what the cities pay to PMPA for electricity, a credit that the cities could pass on to their customers.
The agency has $90 million in reserves – or 272 days of working capital in case of an emergency (an estimated $98.8 million, or 301 days, by year-end).
The agency could lower that cash-on-hand figure to 180 days – and come up with $40 million right away. The board was told the agency’s auditors would need to run that idea past the interest rating agencies – Moody’s and Standard & Poors are the major ones – get their reactions. PMPA right now has an A Rating in the bond market.
The rate structures are important because they are key drivers in how much Clinton charges when the city re-sells electricity.
Residential customers pay the highest “mark-up”, while businesses pay a little less and industries pay even less. For 3 years now, especially in the summer, Clinton residents have complained because what they pay for power are among the highest rates in South Carolina.
The board members agreed to discuss the Rock Hill-Greer payment matter further. The board then heard answers to questions submitted about a proposed 2029 rate structure. The board’s next meeting is scheduled for Sept. 19 at the Greer headquarters.