Agreement will cut electric bills

An agreement reached last week by Duke Energy Progress and the power agency representing Wake Forest and 31 other North Carolina municipalities will ease the debt burden the towns and their residents have borne since 1982.

Exactly how Wake Forest residents will benefit from the agreement will not be known for a year or more, but Wake Forest Mayor Vivian Jones said she was “very pleased that the power agency (North Carolina Eastern Municipal Power Agency or NCEMPA) has approved moving forward with the sale of our generation assets to Duke Energy Progress.”

She went on to say that the sale – if approved by both state and federal regulators – will reduce the debt for the agency by about 70 percent. “The debt accounts for approximately 40 percent of the wholesale power costs for NCEMPA.

“The impact on retail rates will be different for each member of NCEMPA depending on that member’s ownership share, load characteristics, customer mix, etc.  It is too early for us to speculate to what extent our rates would be affected.  We will continue to own our distribution system (power lines, poles, transformers, etc.) and we will continue to receive our power from Duke Energy Progress as we have for over 30 years,” Jones said in a statement.

Currently, the town residents who are customers of Wake Forest Power, the town-owned utility that is operated as if it were a private business, pay $130.68 for 1,000 kilowatt hours, about a month’s worth.

But there are two other utilities who serve town residents. Duke Energy Progress (formerly Progress Energy and CP&L) serves a portion of the west side of town including the Staffordshire subdivision. Wake Electric Membership Cooperative serves a large swath of the southern and eastern side of town including Heritage and has about 7,400 customers inside town limits, enough so it recently built a substation off Rogers Road where there is substantial residential and commercial growth.

Both the other utilities have lower rates for residential customers. For the same amount of energy, 1,000 kilowatts, Duke Energy Progress customers are paying $109.27 and Wake Electric customers are paying $121.44. Wake Forest Power customers are paying $257 more each year than Duke Energy Progress customers, $110.88 more than Wake Electric customers.

How did Wake Forest and the other towns get into so much debt? In 1982 officials from ElectriCities and electric power experts visited all the towns with the message that electric demand was going to skyrocket in coming years and the towns might not be able to buy the power they needed. Their strong recommendation was for Wake Forest and the others to join together and purchase part of existing and future power plants.

The experts turned out to be wrong for two reasons. One was the increased regulation – and thereby increased cost – of building new nuclear power plants like CP&L’s Shearon Harris Plant after the partial meltdown of the Three Mile Island plant in 1979. The second was a new emphasis on energy conservation because of rising energy costs that defused the energy demand explosion. For the towns, there were the cost and time overruns in building Shearon Harris that grew the debt to $3.6 billion, more than their share of the plants was worth.

Wake Forest buys its power through NCEMPA, and that debt makes the wholesale rate much more expensive.

Wake Forest owns a 0.7262 share in each of five Duke Energy Progress plants: Brunswick Nuclear Plant Units 1 and 2; the two coal-burning plants, Mayor Plant Unit 1 and Roxboro Plant Unit 4; and Shearon Harris Nuclear Plant. Wake Forest Power owes about $15.7 million of the total remaining NCEMPA debt of $1.9 billion, which has an interest rate of 5.1 percent.

Under the deal announced on Monday, that collective debt will be paid off and the towns, through NCEMPA, will borrow $480 million at interest rates between 3.75 and 4 percent to pay off the remaining debt.

Although Wake Forest Power customers are paying more than their neighbors in different electric service areas, they and people in other growing towns like Apex and Smithfield are much better off than the people in small and economically depressed towns down East such as Kinston, $148 for 1,000 kilowatts, or little Hobgood, $182.

In Wake Forest, town officials worked hard to keep the rates as low as possible and in fact have raised rates only twice in the past 22 years while the power agency has raised the wholesale rates 12 times. The increases in Wake Forest were 12 percent in 2008 and 4 percent in 2009.

Some of the reasons the town has not had to raise rates include the town’s explosive population growth through the last decade, the conversion of the system to a more efficient voltage and management of the monthly peak load cost.

Deputy Town Manager Roe O’Donnell said, “Because of our three-tier wholesale electricity rate structure from NCEMPA, new load (over 80 percent of it, actually) costs less now to add than it did before the rate structure was agreed. We and Apex are the fastest growing of all eastern agency municipalities.”

The conversion of the system from 4KV to 23KV began in 1977 when the town board agreed to that at the urging of the first town manager, Julian Prosser.

O’Donnell said the conversion continued through the 1980s and into the 1990s. “The higher the distribution voltage, the lower the system losses are. Very few of our sister cities have a distribution system with voltages so high. Most others are 12KV systems, which are not quite as efficient.”

Then there is peak load reduction. “Having a successful load management system allows us to remove over 5,000 kW, or 5 mW, of load during our peak (upon which our demand charge is based).  Remember, wholesale bill has two components – demand in kW and energy in kWh.  For every kW of demand (load) we remove during peak we save $12.50, which we then pass along to our load management customers and, indeed, all our customers generally.  So, removing 5 mW per month saves about $62,500 per month.  Our peak load during the hot summer months is approximately 40 mW, whereas our billed coincident peak load is usually less than 35 mW.”

Wake Forest Power manages load by turning on and off air conditioners and heat strips for heat pumps in participating homes, whose owners have a reduced bill as a result.

For commercial customers, load management is done through generators. “We manage a total of 17 generators throughout town varying in size from 2,000 kW down to 60 kW,” O’Donnell said. “Nine generators are owned by Wake Forest Power and the remainder are customer-owned. When Sam’s Club is built a generator (probably 1,500 kW) will be installed and used for load management. That generator will be customer-owned.”

There is one peak of about an hour every month. ElectriCities monitors the load on the Duke system constantly and signals Wake Forest Power when to go into load management, which can be about nine times a month in the summer, four times in the winter. By reducing the load each time it seems a peak may occur the town can make sure it is managing the load when the highest monthly peak does occur.