Columns » Exile on Jones Street

The cost of electricity is devastating Eastern North Carolina



In nearly every story, at some point the power gets cut off.

Last month, when the NAACP's Truth and Hope Tour of Poverty in NC embarked on its two-day tour of high-poverty counties in the northeastern part of the state, those of us on board the bus knew we'd hear the stories of people who have lived in poverty for generations.

But what we didn't expect was an education on how North Carolina's bizarre municipal electricity system has devastated low-income people, tapped the savings of those on the margins and strained an already frayed social safety net to the point of breaking.

Peter Gilbert, an attorney with the University of North Carolina-Chapel Hill Center for Civil Rights, said communities throughout eastern North Carolina are being squeezed by a decades-old system that allows municipalities that operate their own electric companies to set rates and policies with virtually no state oversight.

Thirty-two municipalities belong to the North Carolina Eastern Municipal Power Agency (NCEMPA). According to a recent estimate by UNC's Kenan Institute of Private Enterprise using 2009 numbers, NCEMPA's roughly 268,000 residential and commercial customers paid $240 million more for electric service than they would have if rates were at the state average.

"We've seen extraordinary bills," Gilbert said. "Many people are paying more for electricity than housing, sometimes two to three times more."

The NCEMP and a sister agency in the western part of the state make up the state's public power system. The big difference between the eastern and western regions is that many years ago NCEMPA members gambled on nuclear power, buying a share of Brunswick and Shearon Harris nuclear plants owned by Progress Energy.

Cost overruns and high interest rates at the time drove up the price of the plants. The result for the 32 eastern towns and cities was a debt burden far greater than anticipated. According to ElectriCities, a nonprofit trade organization that provides management and other services to municipalities, more than a third of NCEMPA's wholesale power cost goes to pay the debt: At the end of 2010 that debt totaled close to $2.4 billion.

What's made matters worse, Gilbert said, is that some towns transfer funds from their electricity operations to shore up their budgets, preferring higher utility rates over higher property taxes.

The transfers, he said, amount to a regressive, back-door tax on ratepayers. "Lower income people spend a greater percent of their money on basic necessities. [The transfers] are effectively a tax that hits the poorer parts of our society the hardest."

It's a system that doesn't seem to likely to change soon.

"Cities have gotten used to the transfer money," Gilbert said. "Many of them have been doing it for a long time. Over the past few years, with city budgets taking a huge hit, they're more dependent on them."

In March, the next leg of the poverty tour will travel through southeastern North Carolina with a stop in Red Springs, where Renet McQueen and her neighbors are trying to draw attention to the problem. McQueen's neighborhood is in Red Spring's Extra Territorial Jurisdiction (ETJ)—outside the town limits but still in the service area of its electric and water departments.

People who live the Red Springs ETJ can't vote for the Red Springs Board of Commissioners, which controls utility rates and policies. The town is one of several in the NCEMPA that transfers money from electricity revenues to cover other town operations.

McQueen, who has been working on the problem since 2003, said the system is unfair. She has watched neighbors dip into meager savings or borrow money from relatives as they scramble to cover electric bills, which can range from $500 to $1,200 a month. One neighbor's children recently moved their mother into a nursing home because the high bills made it impossible to keep the lights on, McQueen said.

"It's just so sad seeing people struggling like that over a utility bill," she said, adding that some months her utility bills are higher than her monthly mortgage payment. "A person shouldn't be forced out of their home over a power bill."

McQueen said the state Utilities Commission, ElectriCities and the Roberson County commissioners have told her they can't do anything because the town sets the rates. Red Springs officials, she said, have yet to adequately explain to residents how the bills are calculated. Moreover, revenue from ETJ residents is used to cover the cost of services that the same residents can't access. And in places like Red Springs there are neighborhoods inside the town limits served by other power companies with much lower rates.

McQueen says she has asked repeatedly for her neighborhood to be allowed to switch to Lumbee Electric Cooperative or Progress Energy; a Progress Energy power pole sits about 30 feet from her house.

"They won't let us switch," she said. "We're revenue to them."

During last year's legislative session, ElectriCities and the League of Municipalities stopped a bipartisan effort to prohibit towns from using electricity revenues for anything but than their electric system.

A bill introduced by Rep. Leo Daughtry, R-Smithfield, and co-sponsored by Rep. William Wainwright, D-Havelock, would have ended the fund transfers, but by the time it passed it was heavily diluted. Daughtry had to amend the bill so that it applied only to Selma, Clayton and Smithfield, the three NCEMPA towns he represents.

The effects of the high electric rates are drawing greater scrutiny from the Legislature, which recently formed the Municipal Power Agency Relief Committee to study the issue.

Thomas Stith, program director for economic development at UNC's Kenan Institute of Private Enterprise, presented the committee with an initial report in January on the impact of high rates on the region's economy.

Stith said the high rates have created a kind of "perfect storm" by making it hard to attract economic development to Eastern North Carolina; meanwhile, businesses and jobs in the region continue to decline. With fewer commercial customers, the rate burden shifts to residential customers.

NCEMPA residential customers pay an average of 13.6 cents per kilowatt hour; the state average is 9.9 cents.

The state needs to solve the problem of the region's high electricity costs Stith said, because the effects extend beyond NCEMPA's boundaries.

Stith said the institute plans to conduct a more in-depth study and is working with the state Department of Commerce to review possible solutions such as reducing NCEMPA's debt burden, the use of renewable energy to lower electricity costs and ways to restructure the municipal power system.

The enormity of the problem requires a major solution, but it won't be simple.

"It's so huge, it's a challenge to find where to attack it," Gilbert said.

Throughout Eastern North Carolina, he said, too many people can't afford to wait.

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