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Published: Mar 29, 2008 12:30 AM
Modified: Mar 29, 2008 03:44 AM

Cheap energy won't last

Demand, plant-building may boost N.C. electricity costs by 50 percent over 10 years

Global economic forces are aligning to usher in a period of sharply higher electricity rates in North Carolina, which has long enjoyed access to some of the nation's cheapest power.

Many energy experts agree that North Carolina's era of cheap electricity, in which some customers have grown accustomed to paying as much as 25 percent below the national average, is coming to an end. Electricity costs are destined to surge as customers are called on to pay for new multibillion-dollar power plants and alternative energies. Meanwhile, electric utilities are trapped between growing energy demand and global warming.

Cost predictions are not widely available, but enough information has dribbled out from the power industry recently to suggest that in North Carolina, electricity costs could surge by 50 percent in the next decade. That would be nearly $50 a month added to a typical monthly bill of $97 for a Progress Energy residential customer.

Bigger electricity bills will increase the cost of living, pinching household budgets and increasing the cost of doing business, especially for energy-intensive industries. The state could lose one of its draws for recruiting new businesses: relatively inexpensive power that yielded annual savings of tens of thousands of dollars a year on an annual corporate budget.

"When these price-increase storms hit, they can have a lot of consequence, and a lot of damage can be left in their wake," said Lawrence Makovich, a senior power adviser at Cambridge Energy Research Associates near Boston. "This is material for many families. Electricity is a necessity. It's not a nonessential item that you can live without."

Based on the most recent cost estimates from Progress Energy of Raleigh, building two new nuclear plants would top out at $25 a month on a typical residential bill, while the expected legislation from Congress to control greenhouse gases from coal-burning power plants could add an additional $20 to a monthly bill. In this state, investment in renewable energy and efficiency programs could add nearly $3 a month. Those costs would phase in over a decade.

Driving those cost estimates are plans for new multibillion-dollar power plants, higher fuel costs to run the plants, new alternative energy requirements and widely expected penalties on coal-fired power plants that exceed greenhouse gas emissions allotted by Congress.

Utility economic forecasts over the years have been spectacularly inaccurate when it comes to estimating power plant costs. Just in the past few years, nuclear plant cost estimates have tripled to about $7 billion at Progress. The projected cost for Duke Energy's coal-burning unit at the Cliffside Steam Station nearly doubled last year to about $2.4 billion. The costs of power plants is paid by customers through monthly bills.

Florida law required Progress to disclose nuclear cost estimates for two reactors in that state. But the company has not discussed the estimated cost of two North Carolina reactors under consideration.

The cost of the company's Shearon Harris nuclear plant in Wake County increased residential customer bills by about 16 percent after regulators rejected the utility's original request for a 26 percent increase. Customers are about halfway through paying for the nuclear plant, which began operating in 1987.

Officials at Progress are reluctant to discuss how power rates might look in the coming years.

"To speculate on that is folly at this point," spokesman Mike Hughes said. "The only thing I can say for certainty is that rates are going to go up, and we're going to do everything in our power to limit that."

The reasons for historically lower energy prices in North Carolina are many, but they are largely based on a reliance on existing nuclear and coal plants, which are comparatively economical to operate.

Lack of deregulation has proven another advantage, as is public policy that allows companies such as Progress and Duke to operate predictably and efficiently by owning power plants and transmission lines in a monopoly service area.

Compared with North Carolina electricity prices, residents in New York and New England pay about 80 percent more. Californians on average pay 50 percent more.

But now some of this state's assets are potential liabilities.

The state's generating capacity is being quickly absorbed by surging population growth. And North Carolina, which relies on coal for 60 percent of its electricity, could be disproportionately affected if Congress passes laws that limit greenhouse gas emissions and penalize violators.

Coal plants are among the nation's leading sources of carbon dioxide, the gas thought to contribute to global warming.

Even without carbon dioxide limits, operation of coal plants is being squeezed by global energy demand, which has driven up the price of coal by 50 percent in the past five years. Since 1991, increased fuel costs have raised electricity costs by 14 percent for Progress' residential customers in this state and 8 percent for Duke's customers.

Future costs depend on the interaction of many factors, all unpredictable. The effect on North Carolina of any congressional remedies for global warming is unclear. The costs of using renewable energy could drop over time. Utilities could negotiate favorable contracts with nuclear vendors and contractors. Some power plants might not need to be built.

"There is a fair amount of anxiety simply because of the uncertainty," said Edward Finley Jr., chairman of the state Utilities Commission, which regulates utility rates. "The unpredictability of it is one of the major factors that has people concerned."

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