District 5 race visible in yard signs

There are no scientific polls conducted in Wilson City Council elections, but the prevalence of yard signs might give some indication of how the election is going. In District 5, challenger Sam Lanier seems to have already claimed victory in the number of yard signs. His bright red signs are as common as pine cones in the Cavalier neighborhood where he lives. Lanier got off to an early start and has his signs in front of every house in some blocks.

Incumbent Donald Evans has recently begun planting his own yard signs, also bright red, but his signs are, thus far, not as numerous as Lanier's, from what I've seen. This weekend I passed one house that had both a Lanier and an Evans sign.

Evans last week sent a mailing to District 5 voters touting his experience and the many positive developments in the city during his two terms on council: Police are nationally accredited, the Fire Department's rating has been updated (saving property owners on fire insurance), the unique All-Children's Playground has been installed at Gillette Park; new businesses are moving downtown; and a new comprehensive plan is being implemented. He addresses the most-frequent complaint against the city, its high electric rates.

Evans offers a brief and not entirely clear explanation of how Wilson and 31 other eastern N.C. municipalities got into this situation. He asserts that ElectriCities was formed by the legislature in the 1960s, but, as the city's own explanation shows, that's not quite true. The legislature passed a bill in 1965 that left municipal electric systems out of the picture; municipalities formed ElectriCities to lobby against that bill. The ElectriCities we know today, and the municipal power agencies that it administers, are the result of a 1975 state constitutional amendment (approved by voters) that allowed cities to invest in privately owned utilities. At that time, rising construction and financing costs painted a bleak picture for electricity customers, and a coalition of municipalities that would provide partial financing for new nuclear power plants looked like the best solution. What looked like a win-win for everyone turned out to be a loser for municipal electricity customers. I strongly recommend the city's concise history of this whole matter here.

The most interesting angle on Evans' mailing, however, is the mailing permit. The postage paid mark on the envelope shows the mailing permit (No. 553) was purchased in Houston, Texas. That would indicate that Evans used a mass-mailing outfit in Texas to handle this job (the envelope's return address is Evans' home address).

Another interesting angle in this nonpartisan election is the partisan leanings of these two candidates. When Evans was a county commissioner, he was elected on the Republican ticket. Lanier last year posted McCain and McCrory yard signs at his home. The two most active candidates in District 5 are nominal Republicans. Two other candidates in the District 5 race — Nadia Minniti and Deanna Diamond — have taken a lower profile thus far.

In the end, this race might come down to a generational referendum. Lanier, 35, is a generation younger than Evans, 62. Youth vs. experience might sway more votes than the other issues or yard signs.

Surprise! Candidates oppose high electric rates

Almost without exception, the candidates for Wilson City Council (and it's good to see the apparently greater interest in the council race this year) have come out against high electric rates. As they say in middle school, "Well, duh!"

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.

ElectriCities CEO folds his cards

Critics of ElectriCities, the umbrella organization that manages the two public power agencies in North Carolina, have a trophy. The criticism became too much for ElectriCities CEO Jesse Tilton, who resigned Friday. The critics might have Tilton's head, figuratively, but that doesn't necessarily a change in attitudes or finances at ElectriCities and its two power agencies.

Tilton, who made around $450,000 a year, had been the target of most of the criticism about high electric rates and wrong financing decisions. But he was one of a number of ElectriCities executives pulling down six-figure incomes. Now, if you eliminated all those big salaries, you would have only a negligible impact on electric rates paid by residents of 51 North Carolina cities and towns that share in electricity generated by power agencies and the additional power bought wholesale from Progress Energy and Duke Power. So Tilton's resignation isn't going to make anyone's electric bill go down.

If member cities and towns are developing a new attitude of stricter oversight and more skeptical attention toward power agency and ElectriCities decisions, things might actually change. Cities, including Wilson, are hearing it from their residents. The impact of high utility rates on economic development, personal finances and business growth is beginning to sink in. Activist residents are howling about high electric rates. These residents are also voters who might carry their frustration and anger into the voting booth.

Unfortunately, the N.C. Eastern Municipal Power Agency and its sister power agency have few means of significantly reducing power rates. NCEMPA is paying for debt incurred in the early 1980s to buy into then-Carolina Power & Light power plants. Servicing that debt plus paying for the universally rising costs of power puts NCEMPA in a bind. Defaulting on the debt is not an option. It would ruin the credit-worthiness of all 32 NCEMPA cities. Probably the best that can be done is to trim costs wherever possible and pay off that debt as quickly as possible. Background talk of possibly floating new bonds to buy into the construction of more generating plants should be squelched immediately. The one thing NCEMPA and ElectriCities don't need is more debt.

Tilton's resignation won't affect those options.

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.