Electric rate payers have few options

The already high and rising cost of electricity is getting a lot of attention in Wilson, but city residents have few or no options in this dilemma. Wilson residents pay some of the highest electric rates in the state, but not the highest. Residents of other member cities of the North Carolina Eastern Municipal Power Agency have that honor. What Wilson and 31 other eastern N.C. cities have in common is debt. The cities formed the power agency and purchased shares of the under-construction nuclear power plants being built by Carolina Power & Light nearly 30 years ago. These power plants came on the drawing boards at a time when state officials feared power shortages, and the nuclear power was supposed to be "too cheap to meter."

Unfortunately, a reactor accident at Three Mile Island in Pennsylvania multiplied the costs of nuclear plant construction and the costs of producing electricity from nuclear power. NCEMPA, which had hoped for cheaper electricity from its portion of the new plants, ended up with more expensive electricity once the bond debt was added onto the generation costs. Bonds were sold in the early 1980s, when interest rates were at historic highs. Although NCEMPA has refinanced to get cheaper rates, the debt is still staggering. The city of Wilson's share is $400 million — about double the city's annual budget.

Electric rates are going up for everyone, thanks to the increased worldwide demand for energy resources, including coal, natural gas and uranium. The higher costs are especially acute in cities like Wilson, where residents are already paying above-market rates.

But here's the problem: Wilson and the other 31 NCEMPA cities are contractually obligated to NCEMPA for another couple of decades. And there's the debt. Theoretically, Wilson could buy its way out of the NCEMPA, but that would only leave it with additional debt, which would have to be applied to electric rates. Some have suggested selling off Wilson Energy, which provides the retail electricity. This scenario was discussed in the late 1990s, when electric deregulation was touted in many states. But California's experience with deregulation of electricity quickly scared everyone else away. No one wanted to be responsible for the rolling blackouts and exorbitant power rates California experienced. Analysts at the time estimated that Wilson and other cities could not get enough from the sale of their electric systems to pay off their share of the NCEMPA debt. Some deregulation scenarios would have forced cities to sell of their electric systems and left them saddled with a debt they could only repay by raising property taxes. For this reason, NCEMPA and its member cities fought deregulation.

Wilson cannot abandon its legal obligations to NCEMPA and it cannot renege on its debt. The only course the city can take is to try to whittle away at expenses, such as the administrative costs of NCEMPA and ElectriCities. But zeroing out those expenses would amount to only a few pennies per month on the average residential electric bill. Aggressive cost-trimming should be attempted, and any proposal to assume more debt (to buy into proposed new power plants) or extend the current debt should be shot down instantly.