July 28--Duke Energy Progress will buy back ownership shares of five power plants from 32 eastern North Carolina towns for $1.2 billion, erasing much of the crippling debt that has forced residents of those towns to pay the state's steepest power bills for decades.
Progress announced the deal this morning with the N.C. Municipal Power Agency, which represents the 32 towns and supplies them with electricity generated from the power plants Progress will buy back.
The towns include Apex, Clayton, Wake Forest, Wilson, Smithfield, Kinston and others within NCEMPA, as the municipal power agency is known. Their 270,000 customers pay on average $240 to $600 more a year for power than Progress customers.
The towns' collective debt will be reduced from $1.9 billion to about $480 million.
"That's a significant decrease in our costs and the savings would be directly passed along to NCEMPA members," said Graham Edwards, CEO of Electricities, the Raleigh organization that provides tactical support to the municipal power agency, in a statement.
The deal will require approval from the Federal Energy Regulatory Commission and from the N.C. Utilities Commission. As part of the deal, Progress will supply electricity to the municipal power agency under a 30-year wholesale power contract.
NCEMPA in turn resells the power to the 32 member towns.
The impact on rates for each town will depend on a number of factors, such as each community's share of the outstanding debt, and the specific power use patterns and customer mix of the community.
Under the terms of the deal, the towns will be able to keep their municipal utility departments, which include utility poles, line crews, bucket trucks and customer service departments.
The 32 towns collectively own 18.33 percent of both nuclear reactors at the Brunswick power plant and 16.17 percent of the reactor at the Harris nuclear plant in southwestern Wake County. They also own portions of two coal-burning units at the Roxboro and Mayo power plants.
The towns acquired the ownership shares in 1982 as a hedge against unpredictable energy costs, but the wager backfired when nuclear costs skyrocketed in the wake of the 1979 nuclear accident at the Three Mile Island plant in Pennsylvania.
The towns had borrowed $3.6 billion, which was pared down to $1.9 billion over three decades. The debt was scheduled to be paid off in 2026 but the timeline will now likely be accelerated.
The debt affected the towns in different degrees. Those with fast-growing populations like Apex, were able to spread out the costs over a larger population base. An average residential power bill in Apex is $116.93 for 1,000 kilowatt hours of electricity, compared to $109.27 for Progress customers.
Wake Forest households pay $130.69 a month while Wilson households pay $141.
The buy-back will be handled by Progress, the Raleigh-based subsidiary of Charlotte-based Duke Energy, and would potentially affect rates of Progress's 1.3 million customers in North Carolina and 200,000 customers in South Carolina.
Duke Energy's 1.9 million customers in North Carolina and 500,000 in South Carolina would not be affected.
Progress spokesman Jeff Brooks said the deal is being structured so that Progress customers will not see a significant rate increase after the power plants are acquired.
"If approved, the purchase will provide long-term fuel savings which will ultimately benefit customers by keeping fuel rates lower over time," Brooks said. "The N.C Utilities Commission will ultimately determine how costs associated with the purchase of these assets are handled."
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