City of Rock Hill utility customers will likely pay about 10 percent more for electricity in 2015 than they do now. But in subsequent years, city officials believe a 10-year trend of electricity rate hikes will slow.
On Monday, the City Council will consider final approval of Rock Hill’s proposed budget for the next fiscal year that includes a 6 percent electricity rate increase. The hike would take effect July 1.
Two weeks ago, the council gave unanimous initial approval to the rate hike with no council members questioning the increase.
In the fiscal year that begins on July 1, 2014, the rate may increase another 5 to 6 percent because the city’s electricity provider, the Piedmont Municipal Power Agency, expects to raise its rate by 6.7 percent, according to city budget’s documents.
Rate increases have been tough for customers, but the city has known that costs for power might increase as the power agency, or PMPA, pays down the debt it incurred to buy part of the Catawba Nuclear Station, said Jimmy Bagley, the deputy city manager who oversees Rock Hill’s utility services.
If this year’s proposed 6 percent increase passes Monday, Rock Hill customers will be paying 31 percent more for electricity than they did a decade ago.
The customers’ rates could have been higher, city officials say. Since the early 1990s, the city has absorbed more than $166 million of PMPA increases without raising rates. The city absorbed those increases by reducing operational costs.
But city officials have made just about all the cuts they can without compromising quality utility service, Bagley said.
Further cuts in services, such as routinely trimming trees near power lines to reduce power outages during storms or laying off employees, would start to affect the service Rock Hill customers expect, he said.
Until around 2009, most of the rising cost of electricity was absorbed through a leaner government or PMPA’s rate stabilization fund.
PMPA’s stabilization fund is not substantial enough anymore, Bagley said, to limit customer rate increases to 1 or 2 percent, the level customers saw until around 2009.
Still, rate increases for Rock Hill’s customers should be smaller again in a couple of years because the amount of PMPA’s debt payments should be lower, he said.
PMPA’s $1B Catawba debt
Rock Hill’s agreement with PMPA ensures a supply of power from the Catawba Nuclear Station.
PMPA, a joint agency of 10 cities in South Carolina, allocates electricity to each of the cities. If the demand is greater than what the PMPA gets from Catawba, the agency purchases power from other companies.
Rock Hill and other S.C. cities joined PMPA more than 30 years ago, when government officials were concerned that investor-owned utilities such as Duke Energy would not be able to keep up with consumer demands for electricity.
A 1978 South Carolina law allowed cities to buy into nuclear plants such as the Catawba station in order to ensure the availability of electricity.
PMPA, which incorporated in 1979, took on more than $1 billion in debt to finance part of the Catawba purchase.
In total, the cost to build the plant was about $3.5 billion.
PMPA owns about 25 percent of one of the Catawba plant’s two reactors. Rock Hill uses about 34 percent of PMPA’s allowance from the plant.
Duke Energy manages the plant.
When Rock Hill joined PMPA, city officials and energy experts expected that Duke’s electric rates--and in turn its customers’ rates--would soar without joint ownership of the Catawba plant, Bagley said.
At the time, consumer power usage trends led most people to think that consumption would exceed the current facility’s capabilities, he said.
But technology changed.
For example, Bagley said, more consumers bought energy-conserving appliances, changing the trend of power consumption.
Duke’s rates didn’t rise as high as most experts thought, Bagley said, and, fortunately, Rock Hill and PMPA chose the right nuclear plant to own.
PMPA’s rates are lower than experts estimated about 20 years ago, he said.
The Catawba Nuclear Station is consistently ranked first in the nation for efficiency and safety among nuclear power plants. Duke Energy is recognized as an excellent manager of the facility, Bagley said.
The plant is well-taken care of, he said, and will probably last beyond its original license to operate until 2043.
PMPA’s debt will be paid off by 2035, about five to 10 years before the plant has to be “de-commissioned” or re-licensed by the federal government, he said.
“Those 10 years are going to be sweet,” because the cost to own part of the plant will level off after debt is paid back, Bagley said.
Experts predicted PMPA’s partial ownership of Catawba would stabilize electricity rates for member cities at a time when wholesale prices from investor-owned utilities were skyrocketing.
Between 1970 and 1975, the wholesale price of electricity went up by 270 percent.
Prior to 1970, municipalities and electric cooperatives didn’t see a need to own or generate their own power. Rapid growth nationwide at that time, however, caused officials to worry about electricity availability, Bagley said.
Rock Hill’s recent growth trends, he said, will probably result in the city needing more electricity than it currently requires from PMPA.
The city will likely need more supplemental power, purchased from other providers such as the Southern Company in Georgia or Duke Energy--at higher rates than it pays PMPA.
There are 21 municipal power providers in South Carolina.
Seventeen participated in the most recent quarterly survey by the S.C. Association of Municipal Power Systems which compares rates current as of Dec. 31, 2012.
In the survey, the city of Georgetown’s rate is the lowest, Westminster Commission of Public Works is the highest and the city of Rock Hill falls in the middle of the pack.
Of PMPA’s 10 member cities, three didn’t report their rates and four reported rates that fell among the 10 lowest in the state. Rock Hill was eighth highest of the 17.
Three of the highest electric rates charged by municipal electric providers in S.C. are in cities that are part of PMPA.
Rock Hill’s budget documents show its electric rate is lower than six other PMPA cities; several Duke Energy cities including Tega Cay, Fort Mill, York and Lancaster; and larger cities such as Charlotte, Columbia and Charleston, powered by SCE&G.
Greenwood Commission of Public Works provides electricity to its city at the second-lowest rate in the state compared to other municipal power entities in the association of municipal power systems survey.
Greenwood was one of 13 cities considering membership with PMPA but decided against taking on debt to pay for part of the Catawba plant.
Steve Reeves, manager of Greenwood CPW, said there was a general feeling in the community and among city leaders that joining PMPA would not be in Greenwood’s best interest long-term.
Reeves arrived at Greenwood CPW in 1991 from the city of Newberry – an electric provider and member of PMPA.
Cities such as Rock Hill and Newberry joined PMPA to ensure electricity would be available amid concerns nationwide that blackouts would happen, he said.
“That never transpired,” Reeves said.
Still, there were warnings and real fear that people without cities forming groups such as PMPA, major energy providers might not be able to afford keeping up with technology growth and demands for electricity, he said.
Hindsight isn’t always “20/20,” Bagley said, and had the 10 PMPA cities not joined up--and other similar partnerships not formed in North Carolina – electric rates and availability of power might be different.
Overall, joining PMPA has been a “good investment that will get better,” Bagley said.
To calculate how a 6 percent rate increase will affect them, Rock Hill customers can look at a recent utility bill and find the line item cost for power consumption.
A customer using 1,000 kilowatts per hour would see an increase of about $6.59 monthly on their bill.
A customer using about 400 kilowatts per hour would see an increase of less than $3 monthly.
Anna Douglas • 803-329-4068