Chambersburg to put $9.3 million into electric utility upgrades

The Borough of Chambersburg is raising money through a bond sale to upgrade and strengthen its public power system. 

The Chambersburg Electric Department sold a $9,315,000 capital improvements bond on Monday, according to a news release from the borough. It will provide funds for five projects: 

• upgrading substations;
• investing in new sustainable/renewable energy projects;
• building a new distribution center at the Borough’s Service Center site;
• transmission system upgrades;
• and investments in expansion or enhancement of the borough-owned generation assets (power plants).

"The Electric Department seeks to invest in capital improvement projects 2019-2021 to upgrade and insure reliability of the Borough-operated public power system, in order to maintain and improve: their safety record, the overall cost of operations, the system’s incredibly reliable power delivery infrastructure, and grow for the future," said Heath Talhelm, president of Chambersburg Borough Council, in the release. 

Residents will not be on the hook to help repay the bond, either through taxes or a rate increase, Borough Manager Jeffrey Stonehill. 

"At this point, the Electric Department, which has not changed rates since 2014, when it lowered electric rates for the third consecutive time, does not plan any rate increase to repay this borrowing as the electric generation supplied to the grid brings in revenue to offset system expenses," he said in an email. 

Read about the history:Chambersburg Electric Department: Lights on since 1890

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How does a bond work?

This type of bond functions like a loan. 

Municipalities and other governmental bodies can sell bonds to investors to finance capital projects, among other things. The seller pays the buyer interest over a set number of years, and agrees to pay the principal at the end of the term.  

Chambersburg will pay an interest rate of 2.433 percent at set intervals over 20 years, and must pay back the more than $9 million loan at the end of that time.  

Stonehill, who also serves as the director of utilities, said it is "an outstanding interest rate" that will allow the borough to save upwards of $700,000 from the original estimated cost of the borrowing. 

He said the proper management of the borough's finances resulted in "extraordinary results," and credited finance director Jason Cohen, solicitor Bryan Salzmann, bond counsel Laura Kurtz of Eckert Seamans and financial adviser John Frey of Public Financial Management Inc. to working together to achieve the interest rate. 

Moody's Investor Services gave the borough's bonds a credit rating of Aa3, considered strong. 

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Borough has largest municipal electric utility

Chambersburg's electric utility provides power to residential and commercial customers, and has been in operation 125 years. It buys multiple sources of generation from multiple suppliers in the marketplace, managed by regional grid operator PJM Interconnection, as well as the borough-owned operation.

The electric department, a non-taxed municipal entity, pays a sum to the borough each year in lieu of the taxes it would have to pay to Pennsylvania if it were a private corporation, Stonehill said. It gains revenue from customer rates and the electricity it generates and provides to the grid. 

More:Pa.'s lowest electric rates are in Mont Alto, Chambersburg

The borough's electric utility is the largest of among 35 such municipal systems in the state. "Chambersburg is the largest municipal electric utility in the State, twice as large as the second largest, Ephrata, Lancaster County; and, the only one to operate multiple generation stations including energy purchases from a landmark landfill gas-to-energy plant in Scotland, Pennsylvania," said Ronald Pezon, electric superintendent, in the release.