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Opinion Power debt still hangs over cities

RALEIGH -- This week, state legislators will begin looking anew at an old problem -- debt taken on by 51 North Carolina communities back in the 1970s in order to provide electricity to their residents.

The debt, taken on as the municipalities decided to buy into new power plants, rose because of cost overruns at the plants. Declining inflation also meant that electricity rates in other communities didn't rise as much as predicted.

The result is that electricity rates in those 51 communities are much higher than the rest of state. In some cases, rates are as much as 50 percent higher.

The high rates aren't just bad for consumers. They are bad for economic development. Local officials believe the high rates hurt the cities when it comes to recruiting new businesses.

Legislators, though, aren’t likely to find any new answers to this old problem.

Twelve years ago, they looked at the issue and came up with three potential solutions: requiring all electricity customers in the state to pay a surcharge to pay off the debt; having the municipalities sell their stakes in the power plants, with the state making up any losses; requiring the towns and cities to get out of the power business.

Instead of taking any of those paths, local and state officials chose to muddle through. And local officials continue to complain.

That's not surprising. All three choices are politically unpalatable for one reason or another.

Under the first option, rate payers in some areas of the state would be bailing out rate payers in other areas.

The option makes sense in one respect: The two big power monopolies in the state, Duke Energy and Progress Energy, own the majority stakes in the plants which the municipalities bought into. A bad deal made by municipal officials in the 1970s theoretically should translate into savings by every other customer of those two companies.

But if you are a politician elected from elsewhere, do you want to look into the eyes of your constituents and tell them that you voted to raise their electricity rates?

As for the second option, those same politicians would be telling their constituents that they used their tax dollars to subsidize someone else's electricity.

Getting out of the power generation business also wouldn't necessarily relieve those cities and towns of their debt or high rates.

The proposed merger of Duke and Progress has led to talk of debt forgiveness or lower wholesale rates for the municipalities, who still buy about 30 percent of their power on the wholesale market.

The lower wholesale rates may or may not materialize. Meanwhile, Duke and Progress officials have made clear that they see merger and the municipal power agency debt as separate issues.

If that remains the case, nothing about the politics of the municipalities' debt will change.

A bad decision made by local officials four decades ago will continue to haunt residents for another two decades.





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published: 10/18/2013
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