Electric savings may be elusive

A Senate candidate has suggested a way Wake Forest's electric customers could save $1.6 million in the next 23 years.

But, town and electric officials say, Congress would have to take action and interest rates would have to drop still lower.

N.C. Secretary of State Elaine Marshall, a Democratic candidate for the U.S. Senate seat held by Sen. Jesse Helms, said in mid-April that, if elected, she would introduce legislation that would allow power agencies to freely refinance their large electric bond indebtedness.

Wake Forest, like 50 other towns and cities in the state, heeded warnings about a sharp increase in future power demand and joined a power agency in the 1970s to help reduce power costs. Those agencies issued bonds and bought shares in electric generation plants like Shearon Harris. After the agencies purchased shares, construction costs soared because of, among other things, Three Mile Island.

Wake Forest now owns less than 1 percent of the Eastern agency's holdings -- 0.7267 percent -- and owes a whopping $22.837 million of principal.

In addition, the town will pay $18 million in interest over the next 23 years.

One reason for the large proportion of interest is federal legislation passed during the Reagan Administration, the omnibus tax bill of 1986. Tim McKay, a spokesman for Marshall, said the legislation restricted power agencies to refinancing the bonds only twice, when in the past they had been able to refinance freely.

"Households and businesses in 51 cities in North Carolina have electric rates that are artificially high because of an unjust federal law," Marshall said. "A coalition of big business and Wall Street is effectively skimming money off our electric consumers."

Marshall said cities "are stuck with higher interest rates and the price has been higher electric rates for households and businesses."

Wake Forest's town manager, Mark Williams, said he would be glad to see any opportunity to reduce the interest rates and therefore the burden to Wake Forest's electric customers.

However, he and Alice Garland, director of public affairs for ElectriCities, said similar legislation has already been introduced in Congress It is facing "a long uphill battle," according to Williams.

Garland said the entire South Carolina Congressional delegation has sponsored a bill which would allow refinancing. But, she said, "The expectation is it won't go anywhere this year.

"Were they (interest rates) to drop now, our hands would be tied," she said.

Garland added she was "very happy to see someone take that position" that Marshall has.

However, Garland said, the tax exempt interest rates (which differ from retail interest rates) would have to fall into the 5 percent range to justify refinancing the bonds. A consideration would be the costs of refinancing, just as there are costs of refinancing a home mortgage.

There are 15 or 16 different bond issues, Williams said, and Garland said the interest rates in the early 1980s were as high as 13 and 14 percent.

The average interest rate now is 6 percent, Garland said.

Together, the two North Carolina power agencies and the customers in their 51 member cities owe $3.8 billion in future interest alone, Garland said, and $5.2 billion in principal. That is billion with a B.

Marshall has Wake Forest ties. Her late husband, Sol, was a cousin of town Commissioner Kim Marshall.