If the North Carolina legislature decides to act on the recommendations of the 29-member Study Commission on the Future of Electric Utility Industry, state residents may be able to choose a power company as early as 2005.
The deregulation committee voted last Monday to approve a document recommending that the General Assembly pursue deregulation legislation even though they lack a concrete plan.
"They've got to come back after the short session and put this into a bill which will be brought up in 2001," said Alice Garland, a lobbyist for Electricities of North Carolina, Inc.
Many hope that deregulation will bring lower prices to consumers.
"The whole purpose is to provide consumers with more choice," said Joe Maher, spokesperson for Duke Power. "Deregulation offers the potential for lower prices as well as for enhanced new services." Maher cited the results of the telecommunications deregulation as proof of potential benefits.
The federal government may soon require the move anyway. "Electricity is the last great monopoly," said North Carolina Sen. David Hoyle, D-Gaston, co-chair of the deregulation panel. "One of the main reasons we are doing this is because the federal government is going to mandate it."
The major barrier to deregulation now is the multi-billion dollar debt held by the 51 existing municipal power companies. "We've got to deal with the municipal debts," he said. "[The companies] have assets of $3 billion and debts of six-and that's a problem."
These debts were accrued from failed investments in Carolina Power and Light Company and Duke Power's nuclear power plant projects.
The recommendation was somewhat vague on how the debt should be handled. But a plan by North Carolina State Treasurer Harlan Boyles has received a fair level of approval.
"Proposals suggesting that the power agency or the indemnifying cities seek bankruptcy relief from their debts are both irresponsible and unacceptable," Boyles wrote in a statement. "A bond default would cost this state much more in the long-run than facing up to the payment burden now."
Boyles proposed that the indebted cities first sell their generating facilities at a fair price. He also suggested that they sell their distribution businesses or retain that function by paying the state an amount comparable to the value of their businesses.
On the other hand, several officials have said the cities could cover the debt by using existing reserves or issuing bonds, if a referendum approves the decision.
However, it is clear that selling $3 billion worth of assets will not cover the $6 billion debt.
One way to bridge the gap would be to place a surcharge on customers whose power companies are responsible for the debt. Bonds would be issued and slowly paid off through the surcharge. "It would be put on cities because they benefited and Duke and CP&L because it was their plants," said Hoyle.
The surcharge would affect approximately 80 percent of customers in the state.
Hoyle said the surcharge would constitute about two percent of the total electricity bill, or somewhere between $1.50 and $2.50 each month for the average residential customer.
CP&L spokesperson Keith Poston said he approved of a surcharge, but wanted it levied on all customers in North Carolina-not just Electricities, CP&L and Duke Power customers. "We reluctantly came to support a surcharge on all the electric customers in the state," he said, noting that the debt is a statewide problem.
Although Boyles proposed the limited surcharge plan, he did say that statewide rate parity was important. "Requiring the next generation of customers to pay higher charges because they buy power in an area that was once served by a city system will place that region in the same competitive disadvantage that it is in now in the regulated environment," he said. He added that many of the areas currently served by municipal power companies are some of the state's lesser-developed areas.
Monday's recommendation set Jan. 1, 2005 as the target date for half of the state to deregulate. The rest of the state would deregulate one year later. Up to 50 percent of each current supplier's customer base may choose on the first date; these customers have not yet been identified.
Garland said she was somewhat disappointed that the full deregulation would not occur in 2005. "We would like to have seen 100 percent deregulation on Jan. 1, 2005," she wrote in an e-mail. "But this whole thing has been the fine art of compromise, and we think this was a pretty good compromise."
Hoyle said residential customers will experience somewhat lower prices under deregulation. "It's not 50 percent, it's not 25, but it is significant," he said.
Garland agreed, provided that a plan for consumer aggregation is passed. "A buying club is essential for the customers to benefit," she said.
Hoyle said he expected that cities and counties would be allowed to aggregate, although he emphasized that the distributors would be investigated before being allowed to open business. "We want to make sure that the people selling power are credible and have the resources and wherewithal to do it," he said.
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