Smithfield Herald

June 20, 2014

Public-power customers pay more

Smithfield’s residential electricity rate is 18 percent higher than Duke Energy’s, but it’s second lowest among the 32 public-power towns in Eastern North Carolina.

Smithfield’s residential electricity rate is 18 percent higher than Duke Energy’s, but it’s second lowest among the 32 public-power towns in Eastern North Carolina.

That’s according to a rate comparison compiled by ElectriCities, an organization made up of public power towns in the Carolinas and Virginia.

Smithfield charges its residential customers a $7.98 base rate and 12.07 cents per kilowatt-hour. A household using 1,000 kilowatt-hours a month would owe $128.68. That same household would pay $109.27 if it bought power from Duke Energy Progress.

Johnston’s other public power towns – Benson, Clayton and Selma – don’t compare quite as favorably. A thousand kilowatt hours would cost $131.99 in Selma, or 20.79 percent more than a Duke customer would pay; $135.25 in Clayton, or 23.78 percent more; and $138.59 in Benson, or 26.83 percent more.

In any household, the average use varies by month. For example, in Smithfield last year, average usage hit a low of 681 kilowatt-hours in May and a high of 1,247 kilowatt-hours in February. Some customers, of course, use more while others use less.

The cheapest public power in the eastern half of North Carolina is in Apex, where 1,000 kilowatt-hours cost $116.93, or 7 percent more than in a Duke Energy household.

Apex has about 40,000 residents compared to 17,700 in Clayton, 12,000 in Smithfield, 6,200 in Selma and 3,500 in Benson. That matters because larger towns can spread the cost of infrastructure across more customers and can charge a lower rate if they choose.

On the high end of the rate scale in Eastern North Carolina, residential electricity costs the most in Hobgood in Halifax County. It’s $182 for 1,000 kilowatt-hours, a whopping 67 percent more than in a Duke Energy household. The second highest rate – $161.16 for 1,000 kilowatt hours – is in Robersonville in Martin County.

Among the 32 public-power towns, the median monthly cost is $142, about 30 percent higher than in Duke Energy territory.

The wide rate spread – from $116.93 in Apex to $182 in Hobgood – occurs for a variety of reasons, said Cecil Rhodes, vice president of the N.C. Eastern Municipal Power Agency, which supplies electricity to public power towns.

The rate structure, he said, reflects the size of the distribution system and the number of staff. It depends also on whether towns offer programs that help customers reduce electricity use during hours of peak demand. Towns pay more for electricity purchased during those hours, Rhodes said.

Finally, the rate reflects whether towns pay for capital projects with borrowed money or with cash on hand, Rhodes said. “One size doesn’t fit all,” he said.

Smithfield’s rate

Smithfield’s electric department budget in 2012-2013 was $18.9 million. Of that, 86 percent went to buy electricity, which cost $16.24 million. The remaining 14 percent went to salaries and to purchase supplies and equipment like utilities poles and vehicles.

At 14 percent of spending on overhead, Smithfield is on the low end of public-power towns, Rhodes said. Most spend 15 to 25 percent on overhead costs.

The cost of debt

In the 1970s, Clayton, Smithfield, Selma, Benson and 28 other towns formed the N.C. Eastern Municipal Power Agency and bought into five power plants at stakes ranging from 13 to 18 percent. At the time, American cities were experiencing brownouts, so buying into power plants guaranteed each town a share of the electricity generated.

One of the plants was Shearon Harris in Wake County. But during construction of that nuclear power plant, the Three Mile Island disaster happened, and the cost of building and maintaining nuclear power plants skyrocketed. This saddled the public power towns with a staggering amount of debt that today stands at $1.8 billion.

Smithfield’s share of that debt is $37.5 million. When Smithfield buys electricity wholesale to resell to customers, the debt repayment is built into that wholesale rate. About 38 percent of the price of wholesale electricity goes to the debt, said Ken Griffin, Smithfield’s public utilities director.

Duke Energy is in negotiations with the towns to buy their shares of the power plants. If that happens, public-power customers could see a drop in electric rates, possibly as low as Duke’s. An agreement could come within the next year.

Griffin is part of the negotiations. He signed a nondisclosure agreement, so he can’t go into specifics. “But I think it’s fair to say that we are for good reasons optimistic that it will occur and for good reasons believe that it will make a significant difference in lower rates for our customers,” he said.

That would be welcome news to Smithfield residents, said Tony Nixon, chairman of the East Smithfield Improvement Organization. “A great deal of folks in a large area of Smithfield are on fixed incomes, or they’re unemployed or underemployed,” he said. “So if you take just a typical person that’s really trying to work and working a full-time job at a minimum wage, it can be quite cumbersome.”

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