The Danville Utility Commission will oversee an evaluation of Danville Utilities’ electric service function to determine how best to cost-effectively serve current and future needs of its customers and the City of Danville and to sustain vital transformation of the area’s economic base.
The decision came Monday, Sept. 22, at a meeting of the Utility Commission.
A variety of factors have increased Danville Utilities’ electric rates above those of surrounding utilities and the biennial rate study currently under way will not likely remedy this competitive disadvantage.
Recommendations will be provided to the Danville City Council on short- and long-term actions to reliably deliver electricity at competitive rates to all customer classes over the long term. This could involve sale of the electric utility, accommodating greater involvement by outside utilities, modification of rate structures, and/or installation of electric power generation facilities.
Although sale of the electric utility is not yet being considered, City Manager Joe King announced Monday that the city held preliminary discussions in the prior week with Appalachian Power on the sale of the city’s power assets.
During those discussions, initiated by the city, King said Appalachian Power representatives expressed potential interest in taking over the city’s electric business.
“They indicated to us that the company is open to opportunities to grow its customer base by purchase electric distribution utilities,” King said. “They want to spend the next 60 days assessing the value of our system.”
Danville distributes electricity to approximately 42,000 customer locations in a 500-square-mile service territory covering Danville, the southern third of Pittsylvania County, and small portions of Henry and Halifax counties.
Appalachian Power is a unit of American Electric Power (AEP), which is headquartered in Columbus, Ohio. AEP is a major investor-owned electric utility, serving approximately 5.3 million customers in 11 states. Those customers include several Danville area industrial customers such as Goodyear Tire & Rubber Co.
King said that sale of the city’s electric utility has not yet been formally considered by the Utility Commission and City Council. If the city eventually decides to move forward with selling its power assets, King said the city would go through a formal competitive procurement process to allow other utility companies to submit proposals if interested in purchasing the city’s electric business.
“Our interest is to make sure our customers are properly served and have the lowest rates,” King said. “We have to determine if we are at the point where that interest is best served by another entity.”
In August, Danville Utility Commission members listened to concerns from large industrial customers served by the city that the city’s rate was not competitive when compared to investor-owned utilities in Virginia and the national average. Commission members were asked to consider allowing industrial customers to purchase power elsewhere, offset the higher rates with tax incentives for job and tax retention, or sell the city’s power assets to another electric utility.
While the city’s electric rate for residential customers is competitive with other power utilities, City Council members expressed concerns on Sept. 16 during a work session about future costs associated with purchasing power and transmitting that power to Danville. Those costs could impact current rates.
At that work session, King suggested that a joint City Council/Utility Commission study group be formed and an outside consultant be hired to explore the sale of the city’s power assets.
The city also provides natural gas, water, wastewater and telecommunications services in Danville. Those services are not being considered for privatization.