Bradford County locks in electric rates before caps expire

TOWANDA - Facing an increase in electric rates when rate caps expire at the end of this year, the Bradford County commissioners on Thursday locked in electric rates for 2011 and 2012 that are even lower than what the county is currently paying, county officials said.

In addition, the commissioners on Thursday passed an ordinance to issue $2,820,000 in tax-free bonds, whose debt service payments will be $785,000 less than anticipated, county Fiscal Director Joan Sanderson said. The bonds are being issued to pay for the county's ongoing guaranteed energy savings project, she said.

At their meeting Thursday, the commissioners also opened a bid for a re-paving project at the Wysox District Court's parking lot and the parking lot of the Bradford County Courthouse.

Rates

"What Bradford County and others are doing is locking in low rates" before the rate caps expire, said Diane Francis, a spokesman for FirstEnergy Corp., which will be supplying electricity to county-owned buildings during 2011 and 2012. Francis, who discussed the two-year agreement with the county in an interview, said that because of the caps, currents rates are low and do not reflect the true cost of generating electricity.

The commissioners on Thursday approved a customer service agreement with FirstEnergy Solutions Corp. to supply electricity for a two-year period, starting on Jan. 1, 2011, to the Bradford County Manor at 6.95 cents per kilowatt hour; to the Bradford County Correctional Facility for 6.65 cents per kilowatt hour; to the EMA/911 department for 6.87 cents per kilowatt hour and to the Bradford County Courthouse at 6.80 cents per kilowatt hour.

The rates are for the generation and transmission charge, which typically accounts for 60 percent of an electric bill, Francis said.

Together, the four buildings covered under the two-year contract use most of the county's electricity, Sanderson said.

The approval of the contract by the commissioners on Thursday means the rates in the contract are now locked in, said Gayle Kershner, Bradford County chief county clerk.

Kershner said the county obtained quotes from three electricity providers, and that FirstEnergy offered the lowest price. The other two providers were Gasmark and Constellation Energy.

The rates that FirstEnergy will charge under the two-year contract are "less than what we are paying now," said Doug McLinko, Bradford County commissioner.

After rate caps expire on Dec. 31, the generation and transmission rates charged by FirstEnergy's subsidiary, Penelec, are expected to rise by at least 10 to 20 percent, Francis said.

The county was not able to shop around for various providers for the distribution component of the county's electric bill, which will continue to be provided by Penelec, Kershner said.

Because Penelec owns the transmission lines and other facilities used in the distribution of electricity, it will receive the distribution charges, Francis said.

Energy savings

The county will pay back the $2,820,000 in bonds for its guaranteed energy savings project, which will be issued at a 2.1 interest rate, over a seven-year period, said Henry J. Sallusti of RBC Capital Markets Corp. of Scranton, which is the underwriter of the bonds.

The interest rate on the bonds was locked in this week, and the bonds were sold on Wednesday, Sallusti said.

The county will pay $494,618 in interest on the bonds, he said.

The total amount that the county will have to pay back on the bond issue - the principal plus the interest - is $3,314,618, which is $785,000 less than anticipated, Sanderson said.

Earlier this year, the borrowing costs for the project were anticipated to be much higher, because the county was planning at that time to take out a 15-year bank loan at an estimated 4.5 percent interest rate.

While the county will need $2,925,000 to pay for the energy savings project, the county is issuing only $2,820,000 in bonds, Sallusti said. That's because most of the purchasers of the bonds paid a premium on the bonds, which is an extra amount above the $5,000 cost of each bond, said Joseph K. Pierce, the bond counsel hired by the county.

The fact that purchasers of the bonds were willing to pay a premium "shows just how hungry the market is for what it sees as safe, secure obligations," he said.

The purchasers of the bonds are paying a total of $168,000 in premiums to the county, Sallusti said.

The premiums "is not money that you (the county) will pay back," Pierce said, adding that the amount that the county will have to pay back is $2,820,000.

Project

The county is not using taxpayer dollars to pay for the guaranteed energy savings project, but is instead paying for the project though savings in utility bills and through reduced maintenance costs on energy-related equipment, such as boilers and air conditioners, county officials have said.

"The entire cost of the project - $3 million - is funded through savings," McLinko has said. The hundreds of thousands of dollars in savings on the debt service "is additional savings on top of all that," McLinko has said.

The guaranteed energy savings project includes numerous energy-saving measures, such as replacing the original single-pane windows in the Bradford County Courthouse, replacing a partially defective 120-ton air conditioning unit at the Bradford County Manor, and replacing two 1989-vintage boilers at the Bradford County jail with more energy-efficient ones, Gates said.

The replacement of the 120-ton air conditioning unit has already been completed, and the rest of the measures are being implemented over the next year, according to representatives from Johnson Controls, the company that is implementing the energy savings measures.

The county received one bid - $46,000 - for the paving project, which was from Lynch Paving. The commissioners tabled action on the bid until it could be reviewed.

James Loewenstein can be reached at (570) 265-1633; or e-mail: jloewenstein@thedailyreview.com.