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July 16, 2009

TELEPHONE MEETING OF THE EXECUTIVE COMMITTEE OF THE WESTERN CAROLINA UNIVERSITY BOARD OF TRUSTEES

July 16, 2009

The Executive Committee of the Board of Trustees of Western Carolina University met by telephone on July 16, 2009. Chairman MacNeill called the meeting to order at 9:02 a.m.

ATTENDANCE
The following members of the Executive Committee were present on the call: Mrs. MacNeill, Mr. Worley, and Mr. Kiser. Also present: Chancellor Bardo, Mr. Wooten, Mr. Kucharski, and Ms. Welch, Assistant Secretary to the Board.

NORTH CAROLINA UTILITIES COMMISSION RATE CASE
Mr. Wooten explained the history of Western’s electric re-sale system whereby we buy wholesale power from Duke Energy and resell that power to approximately 2800 customers located in close proximity to the campus. We last had a rate case in 1993 and our current rates have been at or near the lowest rates in North Carolina. In December of 2008, Duke Energy notified us that our contract for the purchase of wholesale power would expire in 2010 and they would not extend the contract at our current wholesale rates. At the same time, Duke Energy offered an extension in the wholesale power contract with a new rate schedule that reflected a 48% increase in the wholesale power rates effective April 1, 2010 to be phased in over a three year period.

In order for our resale system to remain profitable, we will need to raise our rates. Any profits earned from this system flow to the Endowment fund. Appalachian State is the only other UNC campus that has an electric re-sale system. Our system in considered to be a public utility for the purposes of establishing rates and we must follow the rules of the North Carolina Utilities Commission (NCUC) when wanting to modify our rates. This would involve a public hearing conducted by the NCUC and a full review of our accounting records. The North Carolina Utilities Commission will approve or disapprove. We have engaged an outside consultant to assist us in preparing for this rate case. A proposal will be prepared and submitted to the Utilities Commission to increase our rates to provide adequate revenues to cover our operating costs and to provide a reasonable rate of return off of operations. We currently have 9.7% rate of return approved as part of 1993 rate case; however we experienced a loss this past year as the result of increased operating costs. We would like to increase rates to the point where they generate a reasonable rate of return. Discussion followed. The proposed increase to residential customers would be 8.44% and our new rates will still be below the current rates of Duke Energy and they have just applied to the NCUC for a 12.5% rate increase in 2010. If we are going to keep our system profitable, we need to move forward on this. This is not our core function, and we are doing this for the community. We cannot lose money on this. We are not a public utility but are authorized to re-sell power under laws regarding public education. Rate increases would be implemented in 2010.

Mr. Worley moved that the Executive Committee approve the application for rate increase. Mr. Kiser seconded, and it was approved unanimously.

Dr. Bardo reported that Bill Forsyth has been nominated to the Board of Trustees by the Governor.

ADJOURNMENT
Mr. Kiser moved to adjourn the meeting, and Mr. Worley seconded the motion. The meeting was adjourned at 9:40 a.m.

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