Site Selection Factors Series: #10 Energy Availability and Costs

May 15, 2017

PCED Staff Note: This week’s post is part of a series on evaluating site selection factors from a local perspective titled, “Site Selection Factors”. The aim of the series is to outline the criteria used by companies to determine where they will build new facilities or expand existing ones. We will examine the top 10 factors as adapted from Area Development Magazine’s, “The Top Factor’s to Navigate the Location Maze”¹. Those factors, listed in order of priority, are as follows: Availability of Skilled Labor, Highway Accessibility, Quality of Life, Occupancy or Construction Costs, Available Buildings, Labor Costs, Corporate Tax Rate, Proximity to Major Markets, State and Local Incentives, Energy Availability and Costs. Guest bloggers will contribute each week from their area of expertise. Some topics may span multiple weeks.

The 10^th most important factor for Person County’s economic development success, according the Area Development Magazine 2016, is the energy availability and cost that will be required to power the manufacturing facility or business.

Only a few years ago, the energy availability and cost site selection factor was higher on the list of factors and has recently been losing its ranking of importance due to our national abundance of natural gas hydrocarbons from horizontal drilling and hydraulic fracturing. Regardless of your opinion on this technology, the nation as a whole is experiencing a feeling of more energy security supporting this selection factor ranking. This blog is addressing the energy availability and cost of electricity for new facilities and those considering expansion in Person County but understanding some basic concepts for this site selection factor ranking is noteworthy.

Most of you are aware that Person County has two providers of electricity (Duke Energy and Piedmont Electric Membership Corporation). Each was assigned territory in 1965 by the North Carolina Utilities Commission (an agency of state government formed in 1891). If you are a history buff and interested in learning more about the more than 100 separately organized electric power providers in North Carolina you will find Carolina Country’s illustrated guide of interest.

Energy Availability

Energy availability is a topic that is complex because it covers the energy grid, generation, transmission and distribution functions within the utility services. The United States power grid is a complex network of power plants and transformers connected by more than 200,000 miles of high-voltage transmission lines and 5.5 million miles of local distribution lines. The power grid is always on and it is governed by control centers that monitor and regulate plants and deliver the power to where the load exists.

There are concerns about the nation’s aging power grid that was built for one-way power flows. New resource technologies; such as, renewables (solar, wind) and fuel cells that create bi-directional power flows are grid integration issues that are being addressed by all electricity providers.  Another concern are other technologies (demand management, advanced computing technology, smart appliances) requiring much more sophisticated energy dispatching systems.  The existing electrical system is being constantly updated to address these concerns placing emphasis on the evaluation of the investments that should be made for long-term competitiveness of our state’s economy.

Reliability is a component of the availability factor which is the ability to meet the electricity needs of end-use customers, even when unexpected equipment failures or other conditions reduce the amount of available power supply. At Piedmont Electric, we pride ourselves in our sense of urgency in restoring any outages due to equipment failure or storm-related outages. We understand the importance that electricity plays in running businesses, schools and our homes. This sense of urgency when restoring power is shared by all who provide electricity.

Cyber security is a relatively new threat that is an important focus for all energy providers. Piedmont Electric is focused on strengthening cybersecurity and is united in a coordinated effort across the electric sector to protect the reliability of the electric grid from threats.

Having spent more than three decades in the electric utility field and several of these years trading wholesale power on a power trading energy floor, I had the opportunity to transact power flows with several control centers in the United States. The processes are clearly in place to get energy to control centers where delivery to the end user is coordinated regardless of the location of the nearest power plant.  More importantly the skilled men and women who work to deliver reliable electricity are addressing the concerns mentioned in this article concerning energy availability.

Energy Costs

Energy costs as it relates to the availability of energy can be a factor if the facility locates on a piece of rural property where high voltage power is required to run heavy machinery. If this is a large industrial user, this could require a substation to be built and in some instances a larger transmission substation may be required depending on the location of the property. These large costs could factor into the decision to choose existing buildings where this energy infrastructure is already in place. In Person County, electricity is available at affordable prices. In fact, the price for electricity in North Carolina is below the national average.

Electric providers must recover costs associated with producing and delivering electricity. These expenses include building and maintaining generating plants, transmission and distribution lines, substations, poles, transformers, service wires, meters and metering equipment. There are also costs associated with accounting, customer service, linemen, equipment and right-of-way maintenance. Let us not forget property taxes and interest paid on borrowed money is also cost incurred by your electric provider.

Determining the energy costs charged to rate payers is the result of energy providers’ rate design criteria. For Piedmont Electric, our rate design criterion is as follows:

• Fair and non-discriminatory where member-consumers are treated in a consistent manner. Each member-consumer pays his or her share of the costs of providing service.
• Rates should send the proper pricing signals to member-consumers. Rates are designed to reflect cost causation. The vast majority of costs is fixed and rates are designed to reflect fixed and variable costs as well as the wholesale cost of power.
• Rates encourage efficient and responsible usage – conservation, energy efficiency and the use of renewables allowing member-consumers the opportunity to lower their bill. Having advanced meters allows Piedmont Electric to offer prepay programs, net metering and time of day rates.

The take away that I want to impress is that generating and delivering electricity is expensive but compared to other commodities it is an excellent value.  Electricity continues to improve the quality of our life. The price we pay for the convenience of how we can simply flip a switch to light up a room, watch television for pennies a day or adjust our thermostat when the dog days of summer are upon us is remarkable.   All of us, rather you are an individual or a big industry, can use technology or simply adjust our habits to lower our electric bills.  Both Piedmont Electric and Duke Energy offer free residential energy audits and can provide assistance in industrial audits for existing buildings.  Always seek assistance from trusted energy experts when seeking to make upgrades.

More than Just Energy

The electric providers in Person County provide more than just energy – we are supporters of this county. Both Piedmont Electric and Duke Energy are economic engines that power the communities we serve. Piedmont Electric is currently connecting our offices and all 20 substations with fiber optic cable that can leverage excess strands to help build the backbone for our Community Broadband Initiative, allowing for improved high speed broadband access to underserved areas within Person County. As we work with Person County on this Community Broadband Initiative we see opportunities to make this county more attractive to economic development projects.

Since 2013 Piedmont Electric, through the USDA REDLG program, has loaned more than $5.6 million within Person, Alamance, Caswell, Orange and Durham counties for ambulances, fire trucks, fire stations and schools through our community loan program, and since 1994 we have supported our teachers with more than $400,000 in Bright Ideas grants. To learn more please refer to NC Electric Cooperatives Economic Development and Community Support Programs.

Article References:
U.S. Energy Information Administration https://www.eia.gov/
Save Energy & Money https://pemc.coop/save-energy-money/
Touchstone Energy Cooperatives http://www.touchstoneenergy.com/
America’s Electric Cooperatives https://www.electric.coop/
North Carolina Electric Cooperatives http://www.ncemcs.com/
Carolina Country http://www.carolinacountry.com/issues/2016/energy/a-guide-to-north-carolina-s-electric-power-providers

This post was submitted by Ms. Susan J. Cashion, Vice President - Chief Compliance and Administrative Officer for Piedmont Electric Membership Corporation. Ms. Cashion serves on the national Touchstone Energy Relations Committee and is currently the lead in the nation for USDA Rural Economic Development Grants and Loan Program in grants. She has over thirty years’ experience in the electric utility industry. Ms. Cashion holds a Batchelor of Arts from North Carolina State University in Business Management and Economics and a Masters of Business Administration from Meredith College.