Wilson utility rates gain wider notice

The Raleigh News & Observer has taken note, in a front-page article Friday, of the protests over city of Wilson utility bills. These protests have been the ingredients of City Council meetings and Facebook groups, but major media outlets have not paid much attention up to now.

The article by John Murawski plowed little new ground, though Murawski did a good job of explaining how Wilson and other eastern North Carolina cities came to this dilemma. Fundamentally, this is an investment gone bad. Thirty-two eastern North Carolina cities signed on at the end of the 1970s to a plan to purchase a share of the generating capacity of new generators being constructed by Carolina Power & Light (now Progress Energy). The purchase would guarantee the cities, which had been purchasing wholesale electricity from CP&L, a confirmed, low-cost supply of electrical power to resale to customers. The cities had gotten into the electricity business 70 or 80 years before when the large public utilities were not interested in extending their power lines to less-profitable low-population towns and rural areas.

The cities' purchase, which was supported by the state and allowed by a statewide voter referendum, was the victim of terrible timing. The Three Mile Island reactor scare increased the costs of building a nuclear power plant many times over. CP&L cut back its construction from four reactors to one at its Shearon Harris site, even as costs increased. The cities were saddled with higher costs in return for less electricity. At the same time, lending rates were hitting all-time highs. The prime rate topped 20 percent, so cities not only faced higher construction costs, they were hit with far higher interest costs. The end result for consumers was higher electric rates. The cities in North Carolina Eastern Municipal Power Agency ended up with a $3.5 billion debt. They could not walk away from that debt without causing chaos in financial markets and facing other penalties. The cities and NCEMPA were probably at fault for failing to recognize the seriousness of their situation. Through the 1980s, most cities (including Wilson) continued to use their electricity business as a cash cow to pay for special projects (such as Wilson's Operations Center) and to keep property taxes low. Proposals in the 1990s to deregulate the electricity market resulted in strict new limits on electricity fund transfers.

The N&O story points out a couple of new issues in this debate: (1) the city of Wilson has raised its electricity rates by 58 percent in the past five years, in part to pay for a $35.4 million expansion of the city's power grid; and (2) Wilson charges 30 percent more for natural gas than PSNC does. While the higher electricity rates can be partially justified by the high debt created by a gamble undertaken 30 years ago, the same rationale does not justify higher gas rates.

The city of Wilson has aggressively expanded both its electricity and natural gas infrastructure, even as customers scream about rates and groups threaten legal action. The city's debt makes any proposal to sell its electricity business to a private utility unrealistic, but the city could get out of the gas business and save its residents on the costs of heating, perhaps plowing the revenue from that sale into a fund to lower electricity rates.

Given the excessive rates the city is charging and the debt payments stretching to 2025, it seems unwise to expand the current electric system. Expanding its gas lines, which the city has done fairly aggressively seems to be a disservice to the residents who theoretically "own" the system, which is charging them 30 percent more than a nearby competitor.

I've written many times in the past that there is no simple solution to Wilson's high utility rates, and that's still the case. But city officials' perspective on electricity and natural gas expansion should be re-examined. Rather than what decisions will make the systems stronger and more profitable, they should be looking for ways to reduce their residential customers' costs.