ODEC Pulls Out Of Deal, Ending Utility Deal Saga
BERLIN - The sale of Berlin's electric system is dead.
The months-long saga ended Monday night when the Berlin Town Council voted unanimously to discontinue negotiations for the controversial sale of the power plant and distribution system.
Old Dominion Electric Cooperative's (ODEC) decision to back out of the deal over environmental issues at the Berlin power plant property triggered the town council's decision to halt negotiations with Choptank Electric over the distribution network as well.
'When ODEC pulled out, that changed the dynamic of the whole deal and we could not in good conscience proceed,' said Councilwoman Paula Lynch.
Berlin Attorney Dave Gaskill said the town was legally allowed to end negotiations and essentially kill the sale.
'It was set up where each letter of intent was dependent on a consummated deal,' said Gaskill. 'The letter of intent entered into with Choptank is now voidable.'
The town was negotiating separately with ODEC and Choptank over the electric utility assets, based on complex letters of intent signed last fall after a straw poll of the townspeople narrowly approved the sale.
'A lot of hours and thought went into this but we said the power plant and the distribution system was a package deal, all or nothing,' Berlin Mayor Tom Cardinale said.
The dynamic changed financially, said Lynch, with the loss of the $1.5 million plant sale price.
The $9.5 million sale of the electric distribution system to Choptank Electric would not have been enough to take care of the electric utility's debt and reduce electricity rates, Lynch said, which were the goals of the sale.
'To do that, we needed a certain number of dollars,' she said.
Council Vice President Gee Williams said both aspects of the system needed to be sold to meet the town's goal.
'The sale was to accomplish both goals,' said Williams. 'Only selling part of it doesn't solve the whole problem.'
ODEC chose to nix the sale after an environmental report on the plant property uncovered an old oil spill.
According to the report of Berlin's electric sale subcommittee, read by Lynch Monday night, 'ODEC is unwilling to assume any material environmental liability risk, or any costs associated with remediation.'
Berlin Finance and Operations Manager Joe Davis said the spill was news to the town.
'No one at the plant had knowledge of that spill,' said Davis. 'They've been unable to put a time on it but it's been many years.'
There were hints earlier this year that ODEC was not happy with the deal, Lynch said, but it was not until a conference call in late March that officials realized the deal was dead.
'We learned very late in the game, from ODEC itself, they had been a reluctant member of this team, initially,' Lynch said.
Cardinale feels the town did all it could to make the deal happen.
'The deal didn't go through,' said Cardinale. 'We did all we could.'
ODEC representatives could not be reached for comment.
Mike Wheatley, Senior Vice President for Corporate Services for Choptank, said the company is 'disappointed' over the turn of events.
'We felt like the deal was a good dead for the ratepayers of Berlin and also a good deal for the Choptank membership,' said Wheatley. 'We did what we could to make the deal a reality. All along, we felt the Mayor and the Council did a good job representing the townspeople.'
Wheatley added, 'For the most part, the deal [for the distribution system] was done, in my opinion.'
Now Berlin must move ahead and look for ways to make the electric utility pay for itself, while reducing rates.
The subcommittee report, in addition to halting the sales, recommended that the mayor and council task the Berlin Utilities Commission (BUC) with generating options on several dilemmas facing the town, from reducing electric rates to whether or not to operate the power plant at all. The BUC will also be tasked with looking at the electric utility as a stand-alone entity, run like a business.
Sale opponent Sue Beaman, who filed an unsuccessful lawsuit after the straw poll seeking to have the results voided, said she was delighted that the sale had been stopped.
'Most of us were shocked that it had really happened,' she said. The retention of the electric utility 'gives us another opportunity to do a better job, a much better job.'
Opponent Thom Gulyas, a Berlin resident and business owner, was also pleased the deal turned south.
'I'm extremely, extremely glad they had a change of heart and saw the writing on the wall,' said Gulyas.
Gulyas hopes the town sets up an enterprise fund, separate from town finances, which the mayor and council cannot 'ransack at will,' he said.'We need to get some outside management, get the BUC to oversee it, and run it like a business,' said Gulyas.