Who isn't against high electric rates? Rates charged by the city of Wilson are among the highest in the state, but not the highest in the state. That honor would go, I suppose, to some other N.C. Eastern Municipal Power Agency city. Several NCEMPA cities charge higher rates than Wilson does, but Wilson's rates are still significantly higher than Progress Energy or Duke Power rates. A number of people, from politicians to business developers to ordinary homeowners, have complained that Wilson's high electric rates stifle business growth and place an extra tax on Wilson homes and businesses. Naturally, every candidate looking for a vote is against the city's high electric rates.
What I haven't seen from any of the candidates (or from anyone else) is a rational plan for reducing the electric rate. Wilson's higher rate owes to the interest Wilson and 31 other NCEMPA cities are paying on debt incurred in the early 1980s to buy shares of Carolina Power & Light (now Progress Energy) generating plants. Wilson is responsible for about 15 percent of that debt, the third largest share behind Greenville and Rocky Mount. Wilson's current share of that debt is just under $400 million. The debt is scheduled to be paid off in 2026.
Ownership of the generating capacity was supposed to actually reduce the city's energy costs. Instead of buying directly from CP&L, NCEMPA cities would receive their share of the generating plants' capacity at no additional cost, other than the cost of operating the generators. Wilson City Council actually set its electric rate below CP&L's rate initially but had to raise rates as debt costs increased. Several things went wrong with this rosy scenario. The 1979 Three Mile Island nuclear accident vastly increased the cost of building a nuclear plant. CP&L's plan for four reactors at its Shearon Harris facility near Raleigh was reduced to one reactor, but its cost increased exponentially. The Shearon Harris plant is one of the units NCEMPA bought into. At the same time, interest rates soared, with the prime rate topping 20 percent at one point. The interest on the bonds NCEMPA issued became a burden for the cities. I suspect NCEMPA and member cities also failed to recognize the problem quickly and failed to cut costs or take other measures that might have nibbled into the debt.
Essentially, Wilson and its 31 sister cities in this mess are stuck. Until they can complete payments on the debt, their electric rates will be higher than Progress Energy's. While it's easy to criticize that debt and the higher electric rates, what would the critics have the city do?
• Sell its electric business? This proposal was aired during the debate over deregulating electricity about 10 years ago. The debt each city owes exceeds the value of its electric system. The city could end up with debt payments and no electric system to provide the cash flow for those payments.
• Default on the debt? Defaulting would be catastrophic for the city's financial health. Interest rates on its bonds would soar, and it might not be able to get financing for any purchases, from water lines to police cars. The city would be a leper in the municipal community.
• Cut spending at NCEMPA and its management agency, ElectriCities? That sounds like a simple solution, but eliminating ElectriCities management in its entirety would not result in any noticeable reduction in electric rates. ElectriCities might not be the most efficient operation on Earth, but it's not the cause of Wilson's higher electric rates.
Between now and the municipal election, I suspect we'll hear plenty of complaints about Wilson's electric rates, but ask the candidates how they propose to reduce electric rates. Criticizing the rates is easy; reducing them is difficult, if not impossible. There aren't any painless or even minimally painful solutions to this dilemma.
Unless you have had a meeting with the (new) candidates to discuss their views on the subject, or have called them to ask, it might be a little premature to claim they have no solutions.
ReplyDeleteIn interviews with the newspaper announcing their candidacies, none of the candidates offered any solution, only a sure-fire criticism of high electric rates. If there were a solution, don't you think current office holders, who also say they don't like high electric rates, would have adopted it? Unless someone can find a way to make a $2 billion debt disappear (U.S. Rep. G.K. Butterfield floated the idea of a federal bailout, but it apparently didn't get anywhere), electric rates are going to be high.
ReplyDeleteInterviews? LOL I wouldn't call those interviews. Interviews contain questions. A concept that eludes your local paper.
ReplyDelete"Rates charged by the city of Wilson are among the highest in the state,..."
And the employment rate sure doesn't compensate for that disparity.
The citizens of Wilson would be appreciative of any cost cutting measures, or fiscal creativity within the City, WE or towards Electricites, including saying no to their bigwigs' salaries. And, despite how trite the status quo claims those measures might be.
GO SOLAR
ReplyDelete