Wilson Energy consumers will soon see an increase in monthly costs due to what ElectriCities of North Carolina CEO Roy Jones called “an overreaction” by Duke Energy Progress in 2022.
“There definitely will be rate impacts,” City Manager Grant Goings said. “We wouldn’t need to educate the public if everything was going down. We want to explain what’s going on because it will impact our rates.”
Jones came before the Wilson City Council during Thursday’s monthly meeting to explain how a winter storm in 2022 is affecting customer costs today.
“Back in 2015, we sold our minority ownership interest in our two nuclear plants and our two coal plants to Duke Energy Progress,” Jones said. “When we did that, we entered into a power supply contract at wholesale from Duke for all 32 communities. It’s based upon their cost.”
Jones explained the cost-based pricing is usually beneficial and cost-saving for the 32 municipalities in the North Carolina Eastern Municipal Power Agency, ElectriCities’ eastern North Carolina division responsible for purchasing electricity from Duke Energy.
“In December of every year, they (Duke Energy) give us an estimate of what they’re going to charge us for the next 12 months,” Jones said. “When they close out their books in April of the next year, they come and do what’s called a true-up. Depending on the true-up, some years Duke may owe us money. Other years, we may owe Duke money. It’s all cost-based. Most years since we’ve entered into this contract, the true-ups have been between $1 million and $500,000 for the whole agency. When we got our true-up in 2023 for our 2022, our true-up was $54 million that we owed Duke.”
Jones said ElectriCities has never seen a true-up of that magnitude.
“I talked to Duke’s senior management to really dig in and understand what led to that size of a true-up,” Jones said. “In 2022, if you all recall, Dec. 22-26, we had record-breaking temperatures with Winter Storm Elliott. Duke was actually curtailing a lot of their customers. We had rolling blackouts across North Carolina for probably the first time ever. During that time, natural gas prices went up in excess of $6. They hedged about 70% of their natural gas exposure, but that remaining 30%, they got charged that 6-plus dollars. That sequence of events from the 22nd to the 26th of December is what drove this $54 million true-up.”
Jones said the normal rate for natural gas is about $2 per unit. Duke Energy’s natural gas purchasing through January 2023, however, exceeded $6 per unit.
“The news only gets worse,” Jones said. “That’s what transpired in December of 2022. Duke overreacted. They were concerned about keeping the lights on in January of 2023. Right after Winter Storm Elliott, they went out and bought a whole bunch of power to keep the lights on. Guess what? They bought it at the $6. By time we got to the end of January, gas was back down to $2. We haven’t gotten that true-up yet. It’s coming June of this year. Based on what we’ve seen and what we know right now, that true-up for the 32 communities is going to be $40 million. Wilson’s share of that is $6.5 million.”
Jones said the repayment process for the 32 municipalities will take place over the next three years.
“The 2022 true-up that we paid in 2023, that bill’s been paid,” Jones said.
Although NCEMPA has paid the debt to Duke Energy, the municipalities still owe that amount back to ElectriCitires. Wilson’s share of the debt from 2022 is $9.7 million. Jones estimates Wilson’s 2023 share to total around $6.5 million, bringing the total debt to just over $16 million.
“Beginning April 1 of this year, for two years, we’re going to recover from the 32 communities that $54 million true-up,” Jones said. “The plan is to recover that $6.5 million true-up starting in September of this year over two years as well. We’ve got two true-ups that are going to be running, for a period of time, simultaneous to one another.”
Jones said the silver lining, if any, is that on July 1, 2025, the power agency’s debt will be completely paid off, resulting in an 8% rate reduction for all 32 municipalities.
Mayor Carlton Stevens, trying to wrap his mind around this issue, asked simply if rates are going up or down.
Goings said Wilson Energy customers will see a change in cost, but he emphasized the distinction between a rate increase and a rate rider.
“This is not terminology we use very much in Wilson,” Goings said. “In the past, if we’ve had a rate increase, we’ve had a rate increase. Seldom do they go backward. I wanted Roy (Jones) to explain the temporary nature of this because when it comes time to present the budget, we hope to present an option to put this in place only temporarily so that the residents know that it will automatically expire whenever the rider expires and doesn’t get forgotten, turning into a permanent increase.”
Jones said the distinction between the two terms does make a difference.
“The 32 communities said, ‘We don’t want to have a wholesale rate increase. Leave our rates alone,’” Jones said. “We’re going to implement this rider over here, which means our costs are going to go up, but once that rider goes away, our rates are still what they were. We’re not trying to be cute with our words.”
Councilman Michael Bell asked how long the costs would be passed on to electric customers.
“We will have extensive discussions during our upcoming budget workshops,” Goings said. “It’s not a discussion for tonight. These are local decisions we have to make. If we thought this was a new trend, we would handle it differently. We wouldn’t treat it as temporary. Based on the information Roy shared tonight, it sounds like the perfect storm. Even though it crossed into two years, so it cost us two true-ups, it was really just one event. It just costs us twice because it crossed over that calendar year.”
Goings assured the public that despite an increase in billing, electricity through ElectriCities is still cheaper than purchasing power through Duke Energy directly.
“Even after this, we are far, far, far below Duke Power,” Goings said. “There were days, decades, in this job where we were 30% higher. Even after all this, we’re still way below Duke and projected to be even further below Duke. That favorable gap is promising.”
Mayor Pro Tem James Johnson said no one with ElectriCities or on the City Council is to blame for the increase.
“We didn’t have any power or decision-making, it was Duke Power that ended up making the overreaction for the January month,” Johnson said. “We’re beholden to them. The agency (ElectriCities) didn’t come up with these numbers. Duke did the overreaction. Scared people bought too much too soon. Now we’re paying the price in that true-up.”
