Jun. 11--The Public Works Commission says a long-term agreement sealed Wednesday to buy power will lead to higher bills for its customers.

PWC board members -- Wilson Lacy, Mike Lallier, Terri Union and Luis Olivera -- voted 4-0 to approve the new deal with Progress Energy Carolinas. It is worth $4 billion over the 20-year term.

The contract is the largest ever awarded in the history of the city-owned utility.

Steve Blanchard, general manager of PWC, said customers can anticipate electric bills within five or six years to rise by about 25 percent before leveling off, although exact figures aren't known yet.

Lacy, chairman of the PWC board, said the contract was the best deal PWC could get. It will, he said, help ensure predictable prices and reliable power for another generation.

"PWC has been very diligent in the process of securing a new power agreement that puts us in the best position to continue to meet our customer needs with electric rates that are competitive with other local electrical providers," Lacy said.

Blanchard said he expects federal regulators to approve the agreement in the coming months.

Although the energy contract won't take effect until 2012, PWC will begin to phase in rate increases to help ease the sticker shock.

The commission will decide an electric rate increase next year, setting aside the extra revenue in a fund that will be used to help pay for the anticipated 40 percent increase in the cost of wholesale electricity from Progress Energy.

Blanchard said next year's increase would probably be in the range of 5 percent to 10 percent.

Dwight Davis, a PWC consultant who worked on the new contract, said PWC customers now enjoy low and more competitive rates compared with most other utilities that serve the Cape Fear region.

Here's why: PWC's current Progress Energy contract, signed in 2003, has fixed prices for fuel that didn't anticipate last year's soaring energy costs. Other utilities had to scramble to cover their rising costs, while PWC customers were relatively immune, Davis said.

"We bought Microsoft in the '80s -- it's the equivalent of," Olivera said.

Today, all area utilities but Duke Energy charge customers higher rates than PWC. That will change by 2012 with the new agreement, Davis said.

"I expect this agreement will allow you to be on par, rather than below," he told the commission Wednesday.

Year of negotiations

The new deal with Progress Energy will have rates based on formulas that will include the cost of putting new power plants on line and fluctuating energy prices, Blanchard said.

Work to secure the new contract started in 2006. Bids went out in early 2007. PWC officials spent more than a year negotiating with two finalists, Progress Energy and Duke Energy, which are North Carolina heavyweights in the power business.

Progress Energy, formerly known as Carolina Power and Light Co., has long done business with PWC. The Raleigh-based company, with 1.5 million customers in North and South Carolina, has sold power to PWC through various agreements since 1914.

PWC, with more than 69,000 residential electric customers, is the state's largest municipal utility and is Progress Energy's largest municipal wholesale customer.

The PWC board also voted Wednesday to lease its Butler-Warner power-generating plant near Eastover to Progress Energy. The local utility will use the rent income -- about $11 million a year -- to help offset the cost of electricity from Progress Energy.

Staff writer Andrew Barksdale can be reached at barksdalea@fayobserver.com or 486-3565.

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