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Tuesday, July 22, 2008 10:38 AM Don't compound NCEMPA errors Wilson City Council heard an explanation from a North Carolina Eastern Municipal Power Agency official last week of the agency's electric rate increase, but the explanation did not soothe the feelings of council members or consumers. It's indisputable that energy costs are rising, but higher costs for coal, natural gas and nuclear fuel do not fully explain NCEMPA's wholesale rate increases. Ken Raber, senior vice president of NCEMPA, admitted to City Council Thursday night that an unwise financing decision caused an increase in costs. In 2004, he explained, NCEMPA took advantage of a low variable interest rate, shifting $400 million of the agency's $2.6 billion debt to a variable rate. Unfortunately, interest rates, which were at historical lows, have risen, costing the agency more in debt service. Raber says NCEMPA was not alone in making this error. A lot of errors were made in financing over the past few years. Some of those errors have been costly. Wachovia fired its CEO, who had made a costly error in paying a premium price for a mortgage company engaged in risky loans. Raber gave no indication that heads would roll at NCEMPA over this error in judgment. Raber also raised the possibility that NCEMPA might partner with Progress Energy to expand the former Carolina Power & Light nuclear plant in Wake County. Lest anyone suffer from short memory or amnesia, it was the original deal with CP&L that put NCEMPA $2.6 billion in debt and saddled its 31 member cities with some of the highest electric rates in the state. Councilman Bob Thaxton expressed his anger at the possibility of repeating a gargantuan error. Unfortunately, there is little the city of Wilson or any of the other member cities can do about NCEMPA's past mistakes or about the cities' contractual obligations to remain NCEMPA members and purchase power through NCEMPA. Member cities can, however, demand more transparency, better management, wiser decisions and more frugality by NCEMPA and ElectriCities, which provides management to NCEMPA and another municipal power agency. NCEMPA's top priority should be paying off the burdensome debt it has accumulated. That debt has been the municipal equivalent of subprime mortgages that collapsed the housing market. NCEMPA cities have been paying for almost 30 years and still owe $2.6 billion. NCEMPA and ElectriCities officials may see a new round of borrowing to buy into more power plants as a way of extending their high-paying jobs. But member cities should insist on cost cuts and faster paydown with no new debts. |
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