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Senate | March 18, 2015 | Committee Room | Senate Finance Committee Meeting

Full MP3 Audio File

OXTARQ [0:00:00.0] The Robison and guest Sherry Burg from Charlotte, Senator ??. [SPEAKER CHANGES] I believe that’s all the pledges we have and our Sergeant-At-Arms and staff who always do a good job, there they are, their names are not out here but we appreciate their good work. And Senator Rucho you are up on the update. [SPEAKER CHANGES] Thank you Mr. Chairman and members of the Finance Committee; we have the House Bill 41 before you. [SPEAKER CHANGES] Excuse me Senator; we have motion for the PCS. [SPEAKER CHANGES] I make that motion Sir. [SPEAKER CHANGES] The PCS has adopted. [SPEAKER CHANGES] Thank you and not for discussion, House Bill 41 is the same as we passed on the Revenue Laws, what’s the number of that bill? [SPEAKER CHANGES] Senate Bill 19. [SPEAKER CHANGES] 19, it’s identical to Senate Bill 19 we have had a discussion; we voted on it and did everything. We felt that the house version make some corrections that we can live with so we are going to move forward on 41, the PCS includes the revenue laws decision on the IRRC and ladies and gentlemen to the Senate that IRC is a critical piece of legislation people who are waiting for the rules to be able to pay their taxes and it’s essential that we do this. So what we are trying to offer is Senate and the House an opportunity to vote on a clear IRC Bill along with something they have already passed which is the House Bill 41. So that is the PCS before you, you have voted on the original House Bill 41 and you have voted on the IRC and that includes our staff Mr. Chairman explain the IRC as what we got in. [SPEAKER CHANGES] The staff would stipulate on the PCS please. [SPEAKER CHANGES] Sure. So as Senator Rucho said this PCS has two components one being the IRC update and one being the revenue laws technical changes both of which this committee and the body passed in virtually identical format. So just to refresh your recollection on the IRC update which is the first part of this bill, it is identical to what the Senate passed and it decouples from the five items that we are discuss the only thing that it conforms to is that $250 teacher expense deduction. So it decouples from the enhanced section 179 expensing the exclusion from income forgiveness of debt on principle residents, the mortgage insurance deduction, the tuition expense deduction, and the exclusion from income for the distributions from an IRA to a charity, and that’s CP. And then the second part of the bill is itself ___[03:15] the same as the technical changes that we see in Senate Bill 19 that this body has already passed. [SPEAKER CHANGES] We have heard the explanations, are there further questions? Senator Stein is recognized. [SPEAKER CHANGES] Thank you Mr. Chairman, a question for staff, if a home owner owes $200,000 on their home but its upside-down and the mortgage lender concludes that it’s in their interest or their investor’s interest to refinance that loan to reflect it’s market value to increase the likelihood that they will get paid and they reduce the principle to 100,000 so that the home owner now pays on the smaller mortgage. How much would that person have to pay in cash taxes if we decouple on the mortgage interest premium’s interest? [SPEAKER CHANGES] Staff? [SPEAKER CHANGES] The tax rate times the 100,000 which is the amount of that for given which for 2014 tax rate would have been 5.8% so 5,800. [SPEAKER CHANGES] Comment Mr. Chairman. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Well, actually one follow up question—did the House Bill 41 include this provision when it came over from the House? [SPEAKER CHANGES] No. [SPEAKER CHANGES] 41 was the revenue laws revision not the IRC, they are two separate, Revenue Law something was a technical corrections on revenue law, am I correct? [SPEAKER CHANGES] Yes, Sir. The House changes to the IRC… [0:05:00.5] [End of file…]

Senate the House PCS to Senate bill twenty which is in conference committee. [SPEAKER CHANGES] So do the house bill forty one when it came over from the house did it include this provision? [SPEAKER CHANGES] If your referring to the house version of the RC update that as Cindy said is in Senate bill twenty which is in conference and that bill the House version did conform to that. [SPEAKER CHANGES] So Miss Stein, Senate bill twenty was the gas tax and the IRC it's bogged down. All right the IRC needs to be out of here as soon as possible this is a vehicle that allows us to support what was the revenue law technical corrections plus the IRC clean version that we passed out of the Senate. And so that's the combination for both of them. [SPEAKER CHANGES] One final comment Mr. Chairman. [SPEAKER CHANGES] Yes. Go ahead. [SPEAKER CHANGES] The House saw fit to take out this mortgage interest rate premiums because they recognize that a person who's struggling gets a mortgage reduction in their debt form two hundred to one hundred so they can stay in their home. That was a paper transaction that has no cash to the person it just lowers their debt. So now we're forcing the struggling home owner family to come up with six thousand dollars, fifty eight hundred in cash that they don't have otherwise they would have been paying their mortgage in the first place. So what we're going to end up dong is actually pushing struggling folks into foreclosure who the investor and mortgage company saw fit to renegotiate their debt. So what I would want as the bill sponsor is will you not accept an amendment to take this [SPEAKER CHANGES] No. And Mr. Chairman if I may. [SPEAKER CHANGES] I let you. [SPEAKER CHANGES] This was decoupled last year. And I asked everybody in this room if they heard from anyone who said once if there was a concern about it and the ones that I've heard and there are many have not heard one complaint. This was put together because of the fact there was that bubble. It was designed to be a temporary fix and I think Senator Mckissick will tell you it wasn't done prior that it was a meant to be a temporary solution during a time that it needed to be corrected. At some point you need to stop it we stopped it last year. We're continuing stopping it because of the fact the number of foreclosures don't exist as significantly as they were. So the bottom line is I don't want to change this anything different then what came out of revenue law who sat down spent three four months trying to put together this bill which is a good bill and I would like the Senate to pass it just like you did earlier. [SPEAKER CHANGES] Seeing no other hands. Seeing one hand Senator Cook. [SPEAKER CHANGES] Can I move for a favorable report? [SPEAKER CHANGES] All right I'll take that and I'm seeing no other hands we have a motion for a favorable report all in favor aye [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Any opposed? [SPEAKER CHANGES] Nay. [SPEAKER CHANGES] Bill passes. Senator Rucho thank you. We got the encampa asset sale for discussion only. And Senator Newton is recognized you co-conspirator is not with us today oh yes he here she is Senator Bryant. Welcome. [SPEAKER CHANGES] And I say that Senator Pate is the one that mediates. You want to join us Senator Pate? [SPEAKER CHANGES] Thank you Mr. Chairman, thank you members of the committee. Many of you have heard a little bit of this bill this morning in commerce where we had a really good discussion and voted this bill out. And I'll try not to be too giddy about what we're doing here today and try to hit the high points. So I appreciate the opportunity to be here to talk about this bill. Senator Bryant, Senator Pate, my friend Jeff Collins and representative Susan Martin and others have worked on this piece of legislation and this issue for now many years. For those that don't know, don't live in Eastern North Carolina or some of these communities I believe you have a bill summary in your packet and if you'll look on the back of your bill summary it lists out the cities that are effected directly by this legislation. A little just a little brief history the cities back in the late seventies and eighties decided to become invest

—investors and partners in electrical generating facilities. They own part ownership in shearon harris, the two nuclear reactors in Brunswick and Southport, and two coal fire plants. When they did this, they took on billions of dollars worth of debt. And they've struggled with that debt for a very long time, and today they still owe one-point-eight billion dollars [$1.8B] in debt. And what this means for the rate payers in these cities that buy electricity from their cities is that they're not just paying for the electricity like everybody else does, but they've got to pay the debt! And that is adding a premium to their bills that they've been dealing with for decades, that varies from city to city, but in many cases is as high as a 40— 35 or 40 percent premium over what other, similar rate payers have in other parts of the state. As you can imagine, this is a tremendous and huge economic detriment to the area. It obviously is a disincentive to recruiting new industries and new business, it's very difficult for small businesses that pay maybe a couple of hundred dollars a month extra on their bills as a small business, or more, and certainly families— and working families in particular. Senator Bryant and I, and others, are very familiar with folks who, truthfully, go months at a time without power, keep their food in a cooler on the porch. These are true stories. And it's just very, very hard. So it's hard to believe, in a way, that we're here today with an opportunity to do something about it. The cities, through ElectriCities' NCEMPA, for years have negotiated with— first Progress Energy used to be the old CP&L, and later, Duke-Progress, after the merger, and over time they found a way to come to an agreement, which was the only way to solve this problem, which was for, basically, Duke-Progress to buy its partners out. So they're buying out the shares that the cities own. And they're doing that for a price of one-point-two billion dollars [$1.2B]. So, I'll first point out to you this purchase does not erase all the debt— it erases about seventy percent of the debt. And the cities are still responsible for the remaining debt. And guess what? They're very happy to do that. They want to do that, even though they're still paying on a debt for assets that they will no longer own if we complete this deal. So what this piece of legislation does, in short order, is it legislates what's necessary in order to complete this deal. It provides for the cities on how they're gonna refinance the remaining debt, and it provides the mechanism that Duke will be allowed to recover its cost, which will be spread out over a very long period of time. Now, with that, I commend the Bill to you. I really appreciate the broad based support that we've had so far on this Bill, I think we're over twenty-three or -four co-sponsors so far— I hope we have fifty before we're done. But, anyway, with that I'd like to stop, Mr. Chairman, if I could, and turn it over to my colleague, Senator Bryant, and let her make a few questions, and if it's okay with you we can dive into the Bill with staff. [SPEAKER CHANGES] Senator, I look forward to us having a discussion on it, and Senator Bryant, you're recognized. [SPEAKER CHANGES to Senator Bryant] Thank you, Mr. Chairman, and members of the committee. It's great to be here with you on this particular Bill. It's very important to me because I became intimately familiar with this issue in 2003, when I was serving as a city councilwoman in Rockymount, and at the same time, soon after that became— as I was trying to understand: Why are we saddled with this problem? I purposefully became Eastern Power Agency Commissioner during that time, and learned about ElectriCities' structure and set-up and situation, and how we ended up in the situation we are with this crippling debt that you have seen described. And we have the opportunity to take a major step today that is in line with many of the discussions we've been having in this committee, around how do we deal with the uneven recovery and economic inequities that exist throughout the state. So today you have a chance to take a step at solving, at the structural level, one of those inequities we face in the east that's overlayed upon the uneven economic recovery that we have already been experiencing. And it's in— the three sort of major players in this scenario: There's the Eastern Municipal Power Agency cities [who are on the back of your chart]; there's Duke Energy Progress, and Duke Energy Carolinas. And we all benefit. Our power agency customers are too

170,000 of them. Some of them will get relief, needed relief, from their, from higher utility bills than their neighbors. The Duke Energy progress. Customers get access to cheaper fuel. And ultimately, relief on their power bills. And then the Duke Energy Carolina customers get to benefit from economic development benefits throughout the state. So we are hoping that you will support us in this effort and thanks to all of you who've already been helpful with us. There are financial details that the staff will review and we surely will answer questions about that. Mr. Chairman. [SPEAKER CHANGES] Senator, Senator Paig. [SPEAKER CHANGES] Thank you Mr. Chairman. We've been looking forward to this for a long time and I certainly congratulate Senator Newton for all the hard work he's done. And this is a win-win for the eastern part of the state. And I think the whole state is going to see value in this. And I certainly hope that this bill will pass. [SPEAKER CHANGES] Thank you Senator Paig. Before we move into the discussion phase of this bill, I believe Senator Newton has a clarifying amendment to offer at this time. And we will take in vote on this amendment to get it out so everybody can see what it is. And then next week we plan on Tuesday unless we make a change in this thing, is to have a discussion ?? and the vote on it. Unless there's, something complicates it. That's the plan right now. Senator Newton, you're recognized on the amendment. [SPEAKER CHANGES] Yes. Thank you Mr. Chairman. I'd like to send forth this amendment. I'm not sure ?? And thank you Mr. Chairman. And I would ask, if I could, get Heather Fennel to explain it technically. Basically, in short, this is something that the industrial customers requested that basically clarifies, as I understand it, and the way I read it and the way it's been explained to me, clarifies assumptions that we were already operating on under anyway. And if I could, Mr. Chairman, if Heather would give a more precise explanation other than. [SPEAKER CHANGES] Yes, Heather. And you need to find this ?? [SPEAKER CHANGES] Okay. [SPEAKER CHANGES] Yes, sir. Thank you. In a Ray case, the cost of the utilities are allocated among the right classes. So that would be the industrial, commercial, and residential customers. So that's how the costs are allocated. What the two changes in this bill do, as I explained the bill I can explain them further, but basically it makes sure that any adjustments under the writer that this bill allows are gonna use the customer class allocations that were decided in the last Ray case. So it doesn't allow that question to be opened up every year in the writer and to potentially have those allocations changed. So that's what the first two changes do. There is a third hand written change and that change is just correcting a statutory cross reference that we got incorrect. So that's just deleting that incorrect reference. [SPEAKER CHANGES] Alright, thank you. And you've heard the explanation of the amendment. Do we have a question on the amendment? We have a motion from Colonel Rayben. That we approve the amendment as read. All in favor. Any other discussions? ?? All in favor, aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Any opposed. amendments ?? [SPEAKER CHANGES] Thank you Mr. Chairman. If Mr. Chairman, if I could ask Heather Fennel to basically explain the bill in the more technical sense. And then we'll, if it pleases your Chairmanship, we'll go into questions and discussion. I'm used to saying that. [SPEAKER CHANGES] You in court today? Well, I've appeared many times. If Heather will give us a summary, at least, and then if there's questions we'll have details ?? [SPEAKER CHANGES] Thank you. Yes, sir. So the first section of the bill provides cost recovery for any utility that purchases the assets of a joint municipal power agency. Subsection A of this new section establishes the writer. So the cost of acquiring these generation facilities will be recovered in our writer as opposed to general Ray case. The writer will be set each year by the utilities commission. And the writer will not begin until after a hearing at the commission. This first section also defines acquisition cost as the full amount paid for the assets including any amount above net book value. Subsection B determines the costs that are allowed in the writer. What's going to be allowed in the writer is the acquisition cost, the financing cost, and the operating cost. And this will actually include adjustments that are used to reflect the changes in the proportion of the wholesale and to the retail load in the state that will occur after this. And then again, one of the changes that was put in by Senator Newton's amendment. It clarifies that the customer allocation that was in the last Ray case will be used to determine

the cost allowed in the rider. Subsection C requires the utility to provide certain information to commission in determining the amount of the rider each year. The utility would need to provide information on any over or under recovery resulting from the rider from the previous year, any changes to the cost from the previous year, any changes in capital, and again, added by the amendment, any changes to the customer allocation methodology that was determined in the last general rate case. Subsection D provides that this rider will expire at the end of the useful life of the acquisition of the acquired facilities and if you can see from your summary, the useful life is provided there and it basically ranges from 20-31 years. So that's the cost recovery for the utility. The remaining sections of the bill, sections two through eight, make changes to 159B of the general statutes, and these are the statutes that govern the joint municipal power agencies. So these are the agencies that are made up of the cities that have purchased the ownership assets in these generation facilities. The first section, section two, actually just changes the purposes of that chapter. Section three changes the duties of the joint agencies to allow that they can use the revenues from the joint operated systems and their distribution systems to pay for the new bonds that are authorized under this bill. Section four authorizes support contracts. Support contracts are the way in which the municipal power agencies are going to pay for the new bonds. The support contracts by the joint agency will allow the cities to pay their proportionate share of the bonds and it will allow them to pay the refinanced amount to finance any collateral posting requirements of the replacement power supply arrangements and it will also allow them to finance any required reserves. The support contract can last for 30 years and it will also provide that any of the member municipalities that are on the contract agree to pay the proportionate share of any other city if that city defaults under the contract. There is new language, you can look on page eight, starting lines six through seven, that requires that the payments under the support contracts are considered operating costs and therefore they'll be paid first from the revenues from the electric system. Also, on page eight, lines 43-49, it has language that allows the LGC to take over any city that is negligent in paying for its obligations under the bonds. Section five is the actual language that provides the new bonding authority in subsection B, it's on page nine, lines 31-44. What the purpose of the new bonds being issued for is on lines 34-37, new bonds may be issued for paying the difference between the costs of the project that's being sold and the amount that the joint agency still owes on those assets, and new bonds may be used to finance any collateral posting requirements that are needed for the replacement power supply arrangements. These bonds will be paid with revenues derived from the projects, the sale of power of the cities of the municipal power agencies and with the support contracts that are authorized under this bill. The remaining sections, sections six, seven, and eight, what this does is clarify, make conforming changes to other sections of chapter 159B that makes it clear that the cities in the joint municipal power agencies can use the revenues from the sale of the power to pay for these new bonds as well as the existing bonds. And this act effective when it becomes law and I'm happy to answer any questions. [SPEAKER CHANGES] Alright, there's that [??] for the bill now and it's open for discussion. We'll go to the members first and, we'll go to members first if we have questions that you have, now is the time. I see Senator Hise. I can barely see you over there, you've lost weight. [SPEAKER CHANGES] Thank you, Mr. Chairman. I guess the first thing I wanted to ask about is for each of these municipalities or MPA's to issue a bond for their remaining debt that they're being held, what is the expectations, because with a third of this, Wilson's still going to have to almost $80-100 Million in debt they're going to have to issue a bond for, do you have that kind of capacity for these for a bond issue and are the rates anything we could generally expect? [SPEAKER CHANGES] The short answer is yes, they do, and I think that folks ElectriCities could probably explain that a little bit more precisely than I can but this is, the bonds are collective. As I understand it, it's not each city getting its own bond. So it's not a city's bond rating that's effected, and that's part of the situation is that if one city or town

was unable to was in jeopardy of defaulting or did default. All the other cities remain are responsible for their, they're all in it together. They're all responsible for it. That's in part to get a more advantageous bond situation. Bond rating. [SPEAKER CHANGES] Senator Newton. Sure Senator Bryant. [SPEAKER CHANGES] I just wanted to add I mean that's sort of the reason they formed the joint municipal power agency is for that collective capacity. But there are also provisions in here that require them to use the revenue deal with the debt and maintain that asset so they can be responsible for the debt and the wholesale power agreement they gonna have and the local government commission has the power to intervene if there's any indication they are not managing their finances in such a way as to be responsible for the bond and the business the utility business that they have. Does that make sense? [SPEAKER CHANGES] Senator Newton follow up there. [SPEAKER CHANGES] Thank you Mr. Chair. And one thing I want to add is right now they're paying on a whole lot more debt. And the basis they have to pay the debt is their rates. So their customer base their rate base isn't changing at all with this bill. So they have the same customers the same rate base their just going to be freed to reduce their rates because they don't have nearly as much cost after this deal is completed. So they should be in a much easier position to pay these bonds. Much, much easier position to pay these bonds after the fact then where they are today. And there's not been any problem paying these bonds so far even with all this because the rates are so high. [SPEAKER CHANGES] Senator Newton I think Senator Hise asked a question this morning they're still going to have six hundred or eight hundred million dollars of debt and they weren't able to pay the load they had before and matter of fact they, many of them didn't. They were paying and spending on other things. However, I'm assured by Senator Newton and the rest of you we have tightly drawn this thing to where we're not going to be repossessing city halls and sidewalks. And I think Senator Hise that was probably your concern and I think that was addressed. Senator Rucho. [SPEAKER CHANGES] Mr. Chairman a question if I may on line with what Senator Hise talked about. The state of North Carolina wasn't liable for the debt initially. And at the level of one point eight, what was it, how much is the debt right now? [SPEAKER CHANGES] It's been, if I may Mr. Chairman, it's been paid down to one point eight billion now as of today it was a little over three billion to begin with if I remember correct. [SPEAKER CHANGES] These bonds will pay off about a billion of that now. Go ahead. [SPEAKER CHANGES] About one point two billion is what I understand. And so under the circumstances the state of North Carolina wasn't liable for it but there was always the concern that if any of those municipalities failed the state would come in and intercede and try to bail them out basically. But the fact that one point two has been paid off and there's a six hundred million dollar balance due with the same rate base hopefully lower rates to help your communities that will no longer be an issue for the state to have to worry about bailing them out under these circumstances therefore the state of North Carolina has less financial liability to this case. [SPEAKER CHANGES] Mr. Chair, Senator I think the point if I understand your point is absolutely right. I quite honestly I'm not sure what obligation the state had before but whatever there was there will be a lot less of it now. [SPEAKER CHANGES] Right, thank you. [SPEAKER CHANGES] Good point Senator, good answer too I think that's exactly where we are right now with the financial end of it. I saw Senator Cook about an hour ago, Senator Cook. [SPEAKER CHANGES] Thank you. I just want to say, comment. That for several years in my church there was a sweet old lady who every summer I and others in the church would have to help her with her electric bill. This was in Washington one of the electric cities. And I always thought jeez there's got to be a better way here and the more I looked into that electric cities problem I just didn't see a way out. And I can't tell you how happy and how proud I am of all of us. This is. [SPEAKER CHANGES] Senator Cook I think what your saying is your probably not going to have to pay her bill any more.[Laughter] Thank you, thank you. Senator ?? no wonder your thankful. [SPEAKER CHANGES] That wasn't exactly it, no. [SPEAKER CHANGES] That's what what I got out of it. [SPEAKER CHANGES] Senator Stein

I move for a favorable report. SPEAKER CHANGES We're not going to vote it today. You'll get that chance Tuesday. See that? You had a ?? vote for this thing already. I don't see no other hands. No, excuse me. Senator Jackson. SPEAKER CHANGES Thank you, Mr. Chairman. Senator Newton, I understand what we're doing here, and having represented Kinston?? I understand the burden they were under and I completely understand that, but could you explain to me a little bit how the rate payers that are outside of these are going to be affected, and how it will benefit them in the long run? SPEAKER CHANGES Sure. SPEAKER CHANGES In the short term and the long run, explain that a little bit, please. SPEAKER CHANGES Thank you, Senator, I certainly will. So what Duke Progress is purchasing is generating capacity. They are purchasing about 700 megawatts of generating capacity, 500 of which is nuclear. And the current cost of producing that, those assets, is about $16 a megawatt, if I've got my figures right. The current cost of production for Duke with its other generating assets is $33 a megawatt. So what they're doing is they're buying generating assets that produce it at a lot cheaper. And the best way I understand the term that's been used is it's a fuel cost savings. So what's happening is the Duke Progress customers and Duke Progress are locking in a lower fuel cost, and they're going to be able to use that over the life of these projects. And so long term, those customers, they get the benefit of that, and that's going to cost everybody less in the end. Now, it varies, depending on what kind of rate payer they are as to whether they see immediate cost reduction, or whether that's delayed a little while. And so if you are a large industrial, for example, my understanding and everything that I've seen shows that they have an immediate reduction in their costs. And I've heard of some particular industries that it ranges from $11,000 a year up to several hundred thousand dollars a year in savings. But it varies. SPEAKER CHANGES All right. Follow up. SPEAKER CHANGES So basically what you're saying is most everybody's going to benefit from this deal and their won't be any increases in folk's utility bills. SPEAKER CHANGES So let me be more precise, since you asked the question that way. Everybody over time benefits from this deal. There are some rate payers who, in the first couple of years, will see a very, very small increase in their bill. For example, it's estimated that the average residential customer may see 22 cents a month. So less than $3 or $4 a year. But that would end after a few--after a couple of years, I think it's year 4, and from that point down it would start going down, and so over the life of the project, they're going to have a net savings overall because they're locking in that cheaper fuel cost and that cheaper cost of production. SPEAKER CHANGES Thank you. Good question. I believe that there'll be benefits, Senator, from reading your bill and talking to you. I think there are going to be benefits immediately for some of the bigger users, commercial and industrial, which will recruit in industry quicker because their cost is going to be less at the get-go and over about a four-year period. Even those 22-, 30-cent increases for the residential will go down over maybe a four-year period is what I think I… SPEAKER CHANGES One more follow up. SPEAKER CHANGES Follow up. SPEAKER CHANGES Being you talked so long, Mr. Chairman, I raised another question. I understand on the residentials, and I understand the industrial. What about the commercial customers? SPEAKER CHANGES So the commercial customers vary, as the Chairman indicated, based on their usage, the size they are. So a larger commercial operation should see immediate cost savings. A smaller customer, such as--hypothetically--such as like maybe a convenience store might see a small increase for a couple years, maybe $80, $100 a year at the tops, a year, for just a few years and then, again, like everybody else, it goes back down. And so assuming that they stay in business for a little longer than four years, they should see a net benefit from this deal. SPEAKER CHANGES Thank you, Mr. Chairman. SPEAKER CHANGES Thank you, good question. Senator Davis from the mountains. SPEAKER CHANGES Thank you, Mr. Chairman. Senator Newton, I understand that a significant part of the generation capacity is coal-generated. Is that correct? SPEAKER CHANGES Mr. Chairman. Actually it's about five--of the 700 megawatts, 500 of it is nuclear, and the remain-

200 is coal. [SPEAKER CHANGES] Follow-up, Mr. Chairman. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Is there any potential for North Carolina to be negatively impacted by the EPA's so-called war on coal? [SPEAKER CHANGES] Not from this deal. Honestly, I think the best way to answer this is that is part of the factor of why Duke negotiated to buy these assets, because the nuclear is a very advantageous way, in that context, is a very advantageous way for them to generate electricity. So that was part of the benefit for them. [SPEAKER CHANGES] Senator Davis, if they win that battle on coal then we're all going to pay out the wazoo. [SPEAKER CHANGES] That's true. [SPEAKER CHANGES] Senator Hise, and I believe may conclude the questions. Let's start all over. Senator Rucho, Chairman Rucho, you're recognized and then we're going to go back to Hise. [SPEAKER CHANGES] Thank you, Mr. Chairman. Senator Davis, that was a very good question because if those 200 megawatts that exist because of coal aren't in jeopardy where you lose the ability to generate electricity to pay your debt down, am I correct? [SPEAKER CHANGES] That's correct. [SPEAKER CHANGES] That's, we got assurances through Duke and all the others? Okay. Mr. Chairman, I'd like to comment, if I may. [SPEAKER CHANGES] You have the floor. [SPEAKER CHANGES] I think this is an excellent bill and I do applaud the sponsors to it. I think, in the big picture, which was what the General Assembly and I know Senator Newton knows for sure, that this General Assembly has worked very hard and this is another step in the direction of trying to make sure that all 100 counties in North Carolina have an opportunity of prosperity and so next Tuesday we look forward to being able to move it in. Hopefully, Senator Newton, you can get it put on the floor next Tuesday for a vote, okay? [SPEAKER CHANGES] You heard that, you heard everything but a favorable report. He almost slipped up and said that but- [SPEAKER CHANGES] Out of habit, right? [SPEAKER CHANGES] I'm going back, I saw Senator Hise and then I saw Colonel Rabin and then I didn't see any more after that. Senator Hise. [SPEAKER CHANGES] Thank you, Mr. Chair. One of the things in briefly looking over these projections and h how the savings come in is that the expectation is that over time the base cost of generating energy for Duke Progress will go up and that we've locked in this rate here that's consistent and so as that grows more and more then you're saving over what you would have been paying. Are there any protections, if we have a significant change in the energy market from something, say natural gas exploration in the state of North Carolina, that makes that base load protection actually cheaper instead of increasing in cost that would change these dynamics so that the rest of the state now has energy at a lower cost or makes those adjustments? [SPEAKER CHANGES] Thank you Senator, Mr. Chairman, thank you. I understand your question. So all the work that we've done all along and my working with all the parties involved in this, this has been modeled out under a variety of scenarios, as in cheaper energy, really cheap, natural gas for example, as you eluded to versus higher cost energy. Frankly, we've tried to stick it at the low end on these projections, in other words cheap energy, but if energy costs go up, of course this deal gets better and better. Of course these energy costs effect everybody, regardless of whether this deal is completed or not. I'm satisfied and all the parties are satisfied that under the speculative scenario of maybe falling, it's hard to imagine that gas can get a lot cheaper than where it is right now, but even if it did or it just stayed the same, we're satisfied that this still is a benefit to everyone. [SPEAKER CHANGES] Good question, good answer, and Colonel Rabin, Senator, Colonel. [SPEAKER CHANGES] Thank you, well whichever outranks I'll take. This is more of a comment. Serendipitously, today, a delegation from one of the affected areas stopped in to my office and I've maintained all along that the real basis for this is the economic development impact that it can have all over the state as it runs out. They're just ecstatic in this town that this is coming about because they feel it will make them very competitive with their neighboring towns and be able to spur their economic growth beyond what they could have done before because of the higher rates. It will affect not only that township, that town, that city, but that whole part of

Of my district that's rural. It's a good bill. Thank you. [SPEAKER CHANGES] All right thank you for your comments. Well take one more Senator Daniels. [SPEAKER CHANGES] Is there a closing date? Mr. Chairman do you have a closing date for this already or I assume this is like a debt you've go to pay it off you've got to issue new debt. [SPEAKER CHANGES] So if I remember correctly, Mr. Chairman if I may. [SPEAKER CHANGES] Senator Newton. [SPEAKER CHANGES] If I remember correctly the agreement between necempa and electro cities and due progress is this deal has to be completed by the end of the year. I think that if we are able to move this legislation and get it signed by the governor in short order candidly it should be with what steps are left should be completed I think reasonably I think by late this fall. And that's the rate payers in the necempa areas will see an immediate rate relief as soon as it's completed. So my personal goal and hope is that before winter and cold weather really sets in that the new lower rates will be in place. If that's addressing your question. [SPEAKER CHANGES] Thank you Senator Newton, thank you Senator Daniels and members. Appreciate your input and your questions. And at this time the meeting is adjourned.