“There are three or four that feel there’s a sugar daddy out there,” Town Manager Mark Williams said Monday when asked about a proposal by some eastern North Carolina mayors who want to sell their electrical systems to Progress Energy and in return have their large debts wiped out in part or whole.
The problem is, Williams says, “The assets are not worth what the debt still owed is.”
Wake Forest and 31 other eastern North Carolina went into debt in 1982 at a time power experts were predicting a tremendous surge in demand and recommending towns take over at least part ownership of existing and future nuclear plants. The idea was to keep the town’s cost of electricity low. Then the Three Mile Island near-meltdown occurred, regulations increased and nuclear plant construction costs went through the roof. The North Carolina Eastern Municipal Power Agency, of which Wake Forest is a part, ended up owing a collective $3.6 billion.
Wake Forest owes some figure less than $17.7 million. Williams said he has not seen the new figure after the annual payment was made on Jan. 1, 2011, but the figure after last year’s payment was made was $17,729,047.
The town purchased a 0.7262 percent share of five CP&L plants: the coal-fired plants at Roxboro and Mayo, the one nuclear unit at Shearon Harris and two nuclear units at Brunswick near Southport. The last payment will be made on Jan. 1, 2026.
Wiping out all or part of the town’s debt would reduce the cost of electricity to the 6,057 Wake Forest Power customers because the town-owned electric system is operated as a separate enterprise fund which has to pay all its costs, including the debt repayment, from its revenues.
Williams and town officials have worked hard to keep electric rates as low as possible, absorbing 14 years of wholesale rate increases through system growth, but currently Wake Forest customers pay about 15 to 18 percent more than Progress Energy customers would pay for the same amount of power.
Andrew Brown, who heads up customer service in the town’s finance department, provided information about the differences. For a Wake Forest customer who uses 1,000 kilowatt hours, the cost for energy in a billing period will be $120.80. An equivalent Progress Energy customer will pay $105.65; a member of Wake Electric will pay $89.80. Each utility adds a customer charge and sales tax. For Wake Forest, the customer charge for each billing period is $9.89, the charge for Progress Energy is $6.75 and for Wake Electric it is $10. Wake Forest Power’s current energy charge is $0.1208 per kilowatt, Wake Electric charges $0.0898, and Progress Energy has two seasonal charges. From July through October customers pay $0.10557 per kilowatt and from November through June they pay $0.09557.
The town added a variable fuel adjustment rider in 2006, raised the basic rate by 12 percent in 2008 and then in 2009 raised the rate by 4 percent but included the rider. The town has a number of services that help customers keep their electric bills low, from energy audits to remote control of water heaters to lessen the load during peak times.
Williams does say there is some faint hope for some debt relief. The CEO of ElectriCities, Graham Edwards, promises to do all he can to talk with officials at Progress Energy and Duke Power to see what possibilities there are. Edwards has set up an advisory group for that purpose, and Mayor Vivian Jones will serve on that.
But, Williams said, the proposed merger of Progress Energy into Duke Power has “nothing to do with the power agencies and their ownership.” If the merger takes place, Wake Forest and the other eastern agency municipalities will still be part owners of the plants.
“The merger is about efficiencies for two large [utilities] and what’s best for their stockholders,” Williams said. “They are not going to be magnanimous.” One reason the 32 cities and towns went into debt to buy shares in the existing and future plans was, he said, because the utilities could not raise the capital at that time for their building programs.
“Our best solution is to hold on to our assets until January of 2026. We will own [part of] plants that will produce very cheap power. We will be in a much better position than we are now.”
Both Jones and Williams have held and she holds important positions with the power agency and its overseer, ElectriCities. Jones is the commissioner from Wake Forest on the NCEMPA board and was elected the board chairman last month. Williams was chairman of the NCEMPA board for two years in 2005 and 2006, then was a member of the ElectriCities board for three years.
Progress Energy and Wake Electric both serve some residences and businesses in Wake Forest because the town has grown into areas which were already designated as service areas for those utilities.