Cheaper utility bills coming for some NC towns

Eastern North Carolina residents can expect electricity rate cuts as much as 17 percent this year with the completion of a historic $1.25 billion asset deal between 32 towns and Duke Energy Progress.

In a long-awaited deal announced Friday, the communities – including Apex, Wake Forest, Clayton and Smithfield – have shed a crushing debt burden they took on in 1982, when they bought ownership shares in five power plants. The plants belonged to Carolina Power & Light at the time, and later to Progress Energy, and are now held by Duke Energy Progress.

The ill-fated power plant investment saddled affected North Carolina residents with the highest power bills in the state, typically $240 to $600 more a year than Duke Energy Progress customers paid for the same amount of electricity. The glaring cost disparities, particularly in economically distressed eastern communities, crippled small towns when they tried to recruit business and industry.

“The electric rate issues have been one of the most frustrating challenges our community has ever faced, because it was not something we could fix at home,” said Wilson city manager Grant Goings. “This deal has always been about rate relief for our customers and citizens of Wilson, and we are going to pass along the savings to them.”

Effective Friday, these communities sold back their minority stake in the power plants, including the Shearon Harris nuclear plant in Wake County, for $1.25 billion. The deal took a year and a half to work out, and had to clear two federal agencies, the N.C. Utilities Commission and North Carolina’s legislature. It also had to win approval from 33 local political bodies, including two in Greenville.

Many of the towns have not set the savings figure their residents will see, but some have already proposed and approved rate cuts.

Wilson residents would save about $25 a month for a typical household under a 17.6 percent proposed rate cut. A home in Wilson currently pays $141.60 for 1,000 kilowatt hours of electricity – an amount that costs $111.63 from Duke Energy Progress, the Raleigh-based utility that serves much of the eastern half of the state.

If the proposed rate cut is approved by the city council, Wilson residents would pay $116.70 a month, effective Sept. 1.

“Our goal for the future is rate parity with Duke, and I am confident we will meet our goal,” Goings said.

Rocky Mount residents would save more than $20 a month under a 14 percent rate cut proposal. A typical household there pays $145.54 for 1,000 kilowatt hours of electricity, the typical monthly usage for a home.

“As we close that gap it will make our community a lot more competitive for housing and for commercial customers,” said Rocky Mount city manager Charles Penny.

The Greenville Utilities Commission has approved a 7 percent rate cut and hopes to hold rates flat for five years. Residents would see their residential rate drop from $127.27 a month to $118.03 for 1,000 kilowatt hours.

Massive debt

Residents of the 32 affected towns don’t get their power from Progress, the way residents of Raleigh or Cary do. Rather, they get their electricity from municipal power agencies; those municipal utilities obtain their power through the N.C. Municipal Power Agency, which in turns buys power from Progress and other giant utilities.

Back in 1982, the towns – operating jointly as the N.C. Municipal Power Agency, or NCEMPA – decided they’d be more secure financially if they owned their own power plants, instead of having to negotiate power-purchase agreements with utility companies. So they paid $3.6 billion for 16.17 percent of the Harris nuclear plant before it was completed, 18.33 percent of both nuclear reactors at the Brunswick nuclear plant near Wilmington, as well as shares of two coal-burning units at the Roxboro and Mayo power stations in Person County.

The financial assumptions crumbled as the Shearon Harris nuclear plant experienced delays which lead to massive cost overruns.

The 32 towns were stuck with a massive debt that would not be paid off until 2026. Over the years they tried to negotiate a sell-off but could not unload the burden. As they chipped away at the sum over the years, the deal made sense to Progress because it gives the company full control of its generating assets to produce power more efficiently.

As of this week, the NCEMPA debt had been pared down to $1.72 billion, but the debt payment still costs the towns $260 million a year. NCEMPA’s deal with Duke Energy Progress leaves just $421 million in debt, with an annual debt bill reduced to $51 million.

Savings vary

By erasing most of the debt, NCEMPA will immediately cut electricity costs – by an average 19 percent – it charges to the 32 towns and hamlets; the savings will then flow through to the towns’ 271,117 customers, mostly households.

The actual NCEMPA cost savings for each town ranges from 5 percent for Apex to 23 percent for Tarboro.

The towns can’t automatically pass on the full savings to their customers; some of their utility budget is needed to operate power lines, bucket trucks, utility crews and customer service functions.

Also, power bills vary from town to town depending on their share of the original investment. Utility rates in Apex, for example, are not significantly higher than Progress’s, so the rate cuts there won’t be dramatic. Apex grew from a flyspeck to a major metro area over the past three decades; consequently it was able to spread its utility costs over a large customer base.

Apex charges $114.39 for 1,000 kilowatt hours of electricity, only a few dollars more a month than Duke Energy Progress. Apex officials are projecting a 2 percent reduction for their customers but will study the issue this summer, said city manager Bruce Radford.

This story was originally published July 31, 2015 at 1:35 PM with the headline "Cheaper utility bills coming for some NC towns."