Lower power bills to come?

pseligson@newsobserver.comFebruary 10, 2014 

Johnston County’s four public power towns – Benson, Clayton, Selma and Smithfield – could finally see relief from the debt that’s driven up their electric rates for years.

Duke Energy Progress might buy shares that North Carolina towns own in power plants. Those investments in generating capacity, made decades ago, guaranteed the towns reliable power but also saddled them with debt that has made their power more expensive than Duke’s.

If the deal goes through, public power customers could see their rates fall by 30 percent. But Duke just announced its intentions this past week, and a deal could take two years to complete.

Billions in debt

In the 1970s, the state didn’t have enough electricity to go around. Many towns were unsure if they would be able to obtains electricity for their citizens, and prices kept rising.

A group of 32 towns and cities came together and formed the N.C. Eastern Municipal Power Agency. Together, they bought into five power plants, including nuclear plants in Wake and Brunswick counties and coal-fired plants in Person County. The ownership stakes range from 13 to 18 percent. What is now Duke Energy Progress owns the rest of these plants.

Ownership meant the towns could always get some of the electricity generated by the plants. But then the Three Mile Island disaster happened, and the cost of building and maintaining nuclear plants skyrocketed because of new regulations.

For both Duke Energy Progress and the Power Agency, the outstanding debt sits at $1.8 billion. Smithfield owes about $37.5 million of that, and Clayton owes about $14 million. Paying back that debt is built into the towns’ electricity rates.

What could happen

Last week, Duke Energy Progress announced its interest in buying the Power Agency’s shares in the power plants. That would make Duke Energy the plants’ sole owner.

If everything goes through, the deal would have two parts, said Rebecca Agner, spokeswoman for the Power Agency.

First, the two sides would settle on the price and conditions of Duke Energy buying out the towns. That could cover all of the Power Agency’s debt or leave the towns with some money to pay back.

Second, the two sides would negotiate a wholesale agreement for buying electricity, since the towns would then have to buy all their power on the open market.

“What we’re going into, now and to the future, is to have the cities be as cost competitive as possible in Eastern North Carolina,” Agner said. The aim would be cheaper electricity rates for all 32 towns.

For the deal to pass, all 32 towns would have to agree, along with regulators.

For Duke Energy Progress, the advantage comes from sole ownership of the plants. “There’s potential savings in the way we operate the plant when it’s owned wholly by Duke Energy Progress,” said Jeff Brooks, a spokesman for the company. “And there are other benefits that are generated just in maintaining those assets.”

Johnston County towns

Paul Sabiston, Smithfield’s town manager, said it’s too soon to know what will happen. But if the deal goes through, “we could have conceivably a fair reduction in our rates for the next estimated 10 or 11 years,” he said.

Smithfield’s rates are about 30 percent higher than Duke Energy’s. That added cost comes from a combination of factors, including the power plant debt but also Smithfield’s electric-system infrastructure.

“Our rates would still be a little bit higher than Duke Energy, but hopefully we would close that gap a good bit,” Sabiston said. “And this may be the best way to close that gap between us and Duke Energy.”

Clayton Mayor Jody McLeod said the deal could be a big accomplishment for Clayton. “We knew it was going to be a very long time before Clayton ever got out of that electricity debt,” he said.

The deal would speed things up, “and that would be fantastic for everybody involved,” he said.

Seligson: 919-836-5768

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