COUNTY OF NORTHAMPTON

INTER-DEPARTMENT CORRESPONDENCE

TO: John Stoffa, Steve DeSalva, Vic Mazziotti, John Conklin and Northampton
County Council
FROM: Stephen J. Barron, Jr., CFE
SUBJECT: Impact of Deregulations thus far on Northampton County s Electricity Deli
vered
by PP&L

DATE: March 10, 2010

The attached document outlines the impact of deregulation thus far on Northampto
n County s electric
utility bill. Currently, Northampton County gets electricity from MetEd and PP&L
. While PP&L has had
their rate caps lifted starting in 2010, MetEd does not have rate caps removed u
ntil 2011.

Northampton County entered into an agreement with Liberty Power to purchase powe
r for all locations
that get electricity delivered by PP&L. We are locked into this rate until later
this year and then are free to
shop our electrical needs around combining our usage from PP&L and MetEd. This w
as a very good
agreement and forward thinking by the County Executive and his staff. They shoul
d be commended for
their hard work. In comparing February 2009 to February 2010, the County s bill wa
s 33% higher in 2010
(see attached sheet). While there are several factors involved, and while this w
ill not be consistent all
year it was a bit alarming. Our consumption appeared to be up on a few accounts
this past month which
could be explained by temperature or certain projects going on in the buildings
that drew additional
power.

Currently, the percentage of Northampton County s electric bill paid to PP&L is ab

out 37%. When the
MetEd rate caps come off in 2011 the remaining 63% could be subject to an increa
se.

The Northampton County Executive and his staff have done an excellent job maneuv
ering the county into
a position to save the county money. If we did not shop around when they did to
get the best rate we
could on our electricity, we would be in a much worse position. However, there i
s still much work to be
done.

The next 9-10 months are critical and Northampton County has a unique ability to
negotiate the best deal
to purchase power along with taking steps to conserve and save energy.

The 33% increase is not a fair measure of an entire year as there are several fa
ctors to consider and usage
changes from month to month, but lets take a conservative 20% increase in our el
ectricity from 2009-
2010 which has been a commonly accepted estimate. That will mean that we will pa
y an additional
$114,550.23 to Liberty Power and PP&L in 2010. If we assume that we will pay the
same percentage for
power to MetEd in 2011 it will mean a $191,258.77 increase. This would mean Nort
hampton Count could
see their electricity bill increase $305,809.00 in a 24 month period if nothing
is done. While this is not a
definite figure it is a good conservative estimate of the impact of deregulation
.

I understand that the County Executive and his staff are beginning the process o
f searching for an energy
savings company (ESCo) to conduct an energy audit that will determine what can b
e done to save money.
This is a great idea and should be pursued aggressively. However, when the compa
ny is selected focus
should be placed on looking for ways that the county can become an energy produc
er.

In a presentation made by PP&L to local government leaders on 3/9/2010 it was ma

de clear that
customers must become active participants in finding the best deals. If the coun
ty uses their large land
holdings, hillsides, and rooftops to place windmills or solar panels we could be
gin producing the power
that we use and reverse the alarming trend of alarming increases.

There are several energy companies that will provide the equipment to produce en
ergy for no cost to the
county, as long as they are granted permission and access to our property and bu
ildings. The energy
company then provides the county with a savings on the electricity used that we
produce. These Power
Purchase Agreements (PPA) as they are called can be lucrative, and can ultimatel
y lead to large savings.
There has been a presentation made to the county about a program like this. Whil
e this program was
interesting there are others out there that should be explored. It is possible t
hese programs could lower
electrical costs below the rates paid before deregulation. If these agreements c
an be pursued and the net
cost to the taxpayer is nothing, then it is something to be looked at.

There also needs to be an evaluation of all the real estate and office space tha
t Northampton County owns.
An audit of this type outside an energy savings audit might identify properties
that are a drain to the
county s energy costs. Options can be discussed when the buildings are assessed, b
ut an evaluation would
be helpful as either part of an energy savings audit or as a separate project.

Finally, I believe that the county should have ongoing discussions with MetEd an
d PP&L to take
advantage and build new energy conservation programs geared towards savings for
the county and
municipal governments throughout the Lehigh Valley. PP&L and MetEd will be motiv
ated to work with
us to meet their compliance goals under Act 129. PP&L must have a 1% reduction i
n power use through
energy efficiency measures by 5/31/2011. If they fail the company may face fines
as low as $1 million all
the way up to $20 million. The county and municipal governments have a golden op
portunity to work
with their electrical distribution companies to gain incentives and savings for
changes made that result in
energy savings.

I believe that this is the beginning of a long discussion over several months ab
out energy rates for our
county and the municipalities within our jurisdiction. I think we have a unique
opportunity to work with
PP&L and MetEd to maximize savings and possibly move us towards producing energy
.

We also need to take positive steps to build a relationship with the corporation
s who produce and
distribute our power. As a citizen I am frustrated with the record profits and t
he recent naming of a soccer
stadium in Chester, PA by PP&L. However, moving forward and building partnership
s is the best way to
save energy costs and taxpayer money. That partnership will g a long way toward
making MetEd and
PP&L good corporate citizens that are working as our partner in delivering the c
ounty and its citizens
clean, reliable, and efficient power.