DUC Q&A

Questions posed at the February 26, 2018 Utility Commission Meeting

  1. How can the low income, fixed income and elderly afford to pay a higher utility bill just because the City made a bad purchase and purchased electric that was way out of range for this area?
    The average residential City of Danville customer (1,000 kWh) pays $18.52 more per month for power than the average for customers of Appalachian Power, Martinsville, Dominion and Mecklenburg. Several years ago, the City of Danville made a decision to purchase power and participate in generation projects that officials, at that time, believed would be in the best interests of its customers. The City is taking steps to bring the average costs for power in line with nearby utilities, but this process will take time. There are programs established through Social Services to assist eligible low-income parents, elderly and disabled ratepayers. 
  2. Why does Pittsylvania, Henry, and Halifax counties have to support the City’s General Fund when they do not live in the City and get those benefits of the city resident? 
    Over 100 years ago, the citizens of Danville invested in an electric utility to serve the people of Danville and the surrounding region. Funds transferred to the General Fund represent payment in lieu of taxes that would be paid to the City of Danville if the utility were owned by a third party. The City of Danville is the sole owner of the utility department, which provides service to a 500 square-mile territory that includes parts of Pittsylvania, Halifax and Henry counties. The transfer also represents a return on ownership, which is a benefit to the owners of the electric utility, the citizens of Danville.
  3. What percentage is the county’s payment to the General Fund versus that from the City? 
    The counties do not make a payment to the City’s General Fund. The cost of power for all Danville Utilities customers includes an amount to cover a payment to the City’s General Fund, regardless of where the customer lives. As stated in the answer to the previous question, that payment to the General Fund is based on a payment in lieu of taxes and a return on investment for the owner of the utility (the citizens of Danville). The City uses General Fund revenues to make Danville a more desirable place to live by investing in public safety, education and quality of life amenities that are available to everyone in the region. For fiscal year ended June 30, 2017, the Electric Fund transfer to the General Fund was $9,896,610. Gross sales within the City of Danville represented approximately 61 percent of total sales, while Pittsylvania County sales represented 37 percent and Henry and Halifax counties represented 1 percent each.
  4. In view of the above question, is this a tax violation toward the county? 
    No. The transfer to the General Fund is not a tax. Pittsylvania County assesses a utility tax on the utility bills of Pittsylvania County residents. 
  5. What funds have been paid toward the coalplants in Southern Illinois?
    Prairie State Energy Campus is a 1,600 megawatt-base load, coal-fired electric power plant and coal mine in Marissa, Illinois. The City has generation ownership rights to 49.2 megawatts. Debt payments are included in the City’s monthly power bill and are approximately $1 million per month.
  6. What happened to the 21.5-megawatt plant bought from Morgan Stanley in 2009? 
    Morgan Stanley is a broker from whom the City purchased blocks of power. The terms of the agreement expire on December 31, 2020.
  7. How much longer do we have to pay 30 percent transmission rate increases to AEP? 
    AEP is permitted to change their transmission rates annually. The Federal Energy Regulatory Commission reviews the AEP rate. The rate increased from 2016 to 2017 and again from 2017 to 2018, starting in January of each year.
  8. Is Jason Grey being paid for being on the board of American Municipal Power (AMP)?
    No. Jason Grey has been a trustee since May 2014. His purpose on the board is to represent the interests of the City of Danville and its customers. The board consists of 21 AMP members. 
  9. Is it a conflict of interest having Jason Grey serve on the board of trustees? 
    No. Trustees are elected from AMP membership. Grey was elected by the five Virginia AMP members to serve until September 2019. The role allows for additional oversight into projects that Danville and other Virginia members are involved in.
  10. Would it not be feasible to have an external audit of the Utility department to see if the funds are being used for the customers of Danville and the City itself? 
    The City of Danville undergoes an extensive annual audit for all its funds, including the utilities. It is available for public inspection at the following web address:  https://www.danvilleva.gov/ArchiveCenter/ViewFile/Item/2324. Previous audits are located at this web address: https://www.danvilleva.gov/Archive.aspx?AMID=79. The current auditor is Brown Edwards and Company, a regional CPA firm based in Lynchburg, Virginia.
  11. Why can’t we break the contract with American Municipal Power (AMP)?
    We have multiple contracts and the penalties are substantial. American Municipal Power obtained financing that the City would have to pay back if a contract were terminated early. The contracts are for the life of the generation facility. Some of the newly constructed hydroelectric generation facilities are expected to last for 80 to 100 years. Once the debt is paid, the project rates are expected to provide a stable long-term market rate.
  12. Why does the customer have to pay $50 for the City to come out and check the meter when the meters belong to the City?
    A fee of $60 is charged to customers requesting a field investigation of an electric meter.  The fee represents the cost to dispatch field personnel to a customer location. If a technician determines that the meter is faulty, the fee is waived.
  13. How long is the contract with American Municipal Power (AMP)? When does it end?
    We have multiple contracts with AMP for electric generating facilities. These projects include coal, hydroelectric and gas generation. The City has ownership to the generation rights for the life of the facilities. Most of the projects are newly constructed and the contracts are for the life of generation facility.
  14. There are several industries that are getting a break on their electric bill; so is that shortfall from the industries being passed on to the Danville customers? 
    Residential and small commercial customer rate classes do not supplement the rate established for industries and other high load customers.
  15. Why does Danville have to pay 18k to 20k for old buildings that are sitting and not being used?
    The City’s Public Works Department maintains buildings and the cost is charged to the General Fund. The City is actively pursuing new privately owned uses for the buildings.  Winterizing and safety are the primary expenses.
  16. Can the city start checking the meters about halfway through the month so something can be corrected if the meter is not working properly? 
    The City reads all meters monthly for billing. Whenever significant discrepancies exist in consumption patterns, a meter investigation is initiated. Most often investigations reveal faults in customer equipment, rather than meter failure. Electric meters are tested to 99.99 percent accuracy.
  17. Did American Municipal Power have dealings with smart meters?
    American Municipal Power was neither the consultant nor the vendor for the advanced metering infrastructure (AMI) or smart meter installation.
  18. Is it time for Danville to get out of the utility business?
    In 2014, the City established a Steering Committee to research whether the electric division should be sold or retained. Following months of deliberation, the Committee concluded that the utility should be retained.
  19. Are there presently any lawsuits against AMP?
    The City of Danville is not a party to a lawsuit against AMP.