House and Senate lawmakers last week introduced identical bills to smooth the way for Duke Energy Progress to buy back power plant ownership from 32 debt-saddled towns in Eastern North Carolina.
Sen. E.S. “Buck” Newton, one of the sponsors, said the buyback would translate to rate cuts of 10 percent to 15 percent for the towns.
The Wilson Republican predicted officials in Wilson and other affected towns will cut rates this year if they “don’t want the pitchforks and the torches showing up on their front yards.”
The Progress deal would release the towns from crippling debt that results in their 270,000 power customers paying up to 35 percent more for electricity than Progress customers. Once the debt is erased, the savings should flow to residents and businesses in Benson, Clayton, Selma, Smithfield and other public power towns.
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In Clayton, Mayor Jody McLeod welcomed the legislation. “We’re definitely optimistic about the filing of these bills,” he said. “They’re the next step in sealing a potential deal with Duke that could mean savings for our Clayton public power customers.”
Clayton Town Manager Steve Biggs echoed the mayor’s sentiments: “It’s been very difficult to deal with the fact that Clayton and ... other public power towns in North Carolina must pay higher electric rates,” he said. “So to know this legislation means there’s light at the end of the tunnel is very good news.”
Among North Carolina’s public power towns, Smithfield had the second lowest residential electricity rate in 2014, Town Manager Paul Sabiston noted in an email. And “commercial rates in Smithfield become competitive with Duke Energy if customers are able to shed their power usage with the help of generators during peak-demand periods,” he added.
With the pending debt deal, Sabiston said he looked forward to getting even closer to Duke Progress rates. “Such a reduction in power costs will make Smithfield even more competitive on its residential rates and lower its wholesale cost of power for its commercial customers,” he said.
Local leaders say the exorbitant electricity costs in the public power towns dissuade businesses from relocating or expanding in their communities, some of which are among the most economically distressed in the state.
“We have not been able to recruit any heavy users of electricity inside those municipal areas,” said Rep. Jeff Collins, a Rocky Mount Republican and a sponsor of the House bill.
The House and Senate legislation would allow Progress to pass on the costs of the planned $1.2 billion acquisition to its customers, spreading out the cost recovery over 20 to 30 years, like a home mortgage. By gaining greater share of nuclear power plant capacity, Progress expects to reduce its annual fuel costs by about $70 million.
The bills would also allow the municipal power agencies to issue bonds to pay for operations, an authority they lack under current law.
While Progress would buy the power plant shares, the towns would continue to operate their electric systems.
That fact is important to McLeod. “We want to make sure people understand that this sale of electric generation plants does not mean Duke Energy will become the power provider for Town of Clayton residents,” he said. “Duke Energy trucks won’t be the ones responding to power outages in our area; it will still be the same dedicated local Clayton team responding quickly from our operations center right here in town.”
Neither will the deal mean job losses, McLeod said. “There will be no layoffs of lineman or electric department staff, and that’s good news,” he said.
The Progress buyback received approval in December from the Federal Energy Regulatory Commission, but the plan still requires approval from the N.C. Utilities Commission and the 32 towns.
In 1982, those towns, through the N.C. Eastern Municipal Power Agency, invested $3.6 billion in shares of Progress power plants, then operating as Carolina Power & Light, as a hedge against volatile energy prices.
The debt is down to about $1.7 billion today and will be reduced to $480 million after Progress buys back the plants. The NCEMPA is paying about $260 million to $270 million annually in interest on the outstanding debt today; the interest will drop to about $60 million a year after the towns offload their shares of power plants.
“Because the negotiations are ongoing, we simply don’t know exactly how much we will be able to lower our rates yet,” said Biggs, the Clayton manager. “But this legislation could finally bring us closer to making our costs to customers more competitive.”
Smithfield is getting ready to crunch numbers to see how low it can go, Sabiston said. “Presently, the town is focusing on preparing a cost-of-service study and a rate analysis to hopefully lower the rates for all customers, both residential and commercial, in the next fiscal year,” he said.
“I hope this legislation passes and is signed by the governor in less than a few weeks,” Newton said. “We really have a historic opportunity here to address something that’s been a real problem in Eastern North Carolina for decades.”
Staff writer Colin Campbell and Smithfield Herald editor Scott Bolejack contributed.