Darlington, South Carolina to Form City-Owned Power Company

Date: February 15, 1996

The city of Darlington, North Carolina is debating whether to hold a referendum on forming a municipally-owned electric company to bypass its current utility, Carolina Power & Light and buy power from other companies. James River's Dixie Cup plant, one of Darlington's largest employers, is pushing for some way to lower the city's $1.7 million-a-year electricity bill under CP&L, and has warned that failure to do so may result in laying off employees who are the majority of residents there.

CP&L, which has the highest industrial rates of any investor-owned power company in South Carolina, says the municipalization effort might lead to higher taxes or higher power bills. The utility wanted the negotiations to be kept between the power company and Dixie, but word got out and a campaign of workers and retirees was organized to promote city-owned power.

Darlington's City Council is scheduled to vote on whether to have a referendum on municipalization. If the referendum is held, it is believed that Darlington will vote for city-owned power.

A dozen other South Carolina towns have asked the South Carolina Municipal Association for information on city-owned power systems which has become attractive since it is cheaper. Columbia had a consultant discuss city-owned power with its City Council last year. Nationally, about one or two dozen cities have begun the difficult process of taking over electric power, said Ernest Liu, an electric-industry analyst with Goldman Sachs.

21 cities in South Carolina operate municipal power systems and sell power to their citizens, many of which were formed decades ago, sometimes as the first electric service in town. Camden formed South Carolina's last city-owned power system in 1947. No major municipalizations have occurred in South Carolina since 1969, when the current electric service territories were written into South Carolina law.

In 1992, Congress allowed wholesale customers to choose their power companies. The law also required electric utilities to allow competitors access to their transmission lines for a fee. This has provided an oportunity for cities to gain access to competitive markets for electricity, and to use their force of numbers to bring rates down.

CP&L's rates are higher than other big utilities in the region, in part because of a struggling nuclear plant in North Carolina. So customers have aggressively pushed the Raleigh-based utility for better rates. DuPont, which is CP&L's biggest customer threatened to make its own electricity several years ago -- and was given a 10 percent rate reduction. CP&L's strategy has been to cut a similar deal with Dixie, but the local community has organized for a solution that is equitable to all businesses and residents in the city.

According to CP&L, a city-owned power system would be expensive. Darlington will have to buy from CP&L the lines and poles needed to bring power to its citizens. That means issuing bonds, which can be expensive. The city plans to ask both parties to pay for a study to evaluate the costs involved in the process. James River has offered to buy the $1 million or so in bonds needed to connect its Dixie plant to the city system.

Residents of Darlington might want the municipal system to serve all customers, because CP&L's residential rates are high, but the City Council is not sure which customers a municipal system would serve. Dixie has suggested serving big customers, including itself, first.

Even if the referendum is scheduled -- and if it passes -- Darlington faces a legal fight. A consultant for CP&L has already written a seven-page memo threatening to sue Darlington and Dixie (Dixie has a service contract with CP&L that lasts until 1999) to stop municipalization. The utility attempted to sue Bennettsville's city-owned system when it left CP&L for the Marlboro Electric Cooperative, but the city prevailed in court. Meanwhile, CP&L has agreed to continue to sell electricity to Darlington for an "indefinite period of time," said a CP&L spokeswoman. .