Kinston prepares for 4% electric rate cut following cost of service study
Kinston residents could soon see lower electric bills as city officials move forward with a proposed 4% rate reduction, the first in several years. The change, which follows a cost of service study by Booth & Associates, will be the subject of a public hearing on Oct. 7 at 5:30 p.m. in City Hall.
If council adopts the proposal that night, the new rates will take effect Oct. 15. For the average household, that means about $6 off the monthly bill.
Why the city can lower rates now
Steve Miller, director of Kinston Public Services, said the timing of the cut is directly tied to the last payment on a decades-old wholesale power debt. The North Carolina Eastern Municipal Power Agency carried the debt after selling its generation assets to Duke Energy.
“That last debt payment was made in June,” Miller said. “That overall reduced our wholesale power bill by about 8%. At the same time, Duke increased energy and demand costs by about 3.5%. The balance is what we looked at and said, if we do not need this, let us give some back to customers.”
The study confirmed that Kinston was generating slightly more revenue than needed to cover wholesale costs and system expenses. Booth & Associates estimated about 4.7% in excess revenue. Miller recommended giving back 4% and keeping the remaining 0.7% in reserve to strengthen the city’s “rate stabilization” fund.
How long will it last?
Some residents worry the cut will be temporary, especially since Duke Energy has already projected wholesale increases beginning in April 2026 and continuing for several years.
“Someday it will be erased,” Miller said. “Inflation and other factors will drive utility costs up higher as we go forward. The question is, how far can we carry it forward? Based on the estimates we are seeing, we think we can hold the rates we are setting now until probably 2030.”
Kinston has historically kept rates steady for years at a time instead of adjusting annually. Miller said customers prefer the stability.
Why 4% across the board
The study recommended larger cuts for some customer classes and smaller or no cuts for others. Miller said city leaders instead proposed the same 4% reduction for everyone.
“About 97% of our customers are residential, small general service, or medium general service,” Miller said. “Under the first phase of Booth’s recommendations, those customers would not have seen any reduction and some would have seen increases. We did not feel that was fair. If we have the ability to reduce bills, everybody should see a benefit.”
Questions about reserves and riders
Kinston also maintains a “rate stabilization” fund to cover unexpected costs, including Duke’s annual “true-up” charges that often result in higher bills to member cities.
“In the last few years, it has almost always been, ‘You did not pay enough, we are going to charge you more,’” Miller said. “We can cover those extra charges using stabilization funds and not have to turn to customers for short-term increases.”
The city’s most recent financial reports show the size of those reserves. Exhibit 6, Statement of Net Position (ACFR Page 24, Electronic Page 68) reports the Electric Fund’s total net position at $82,244,109 as of June 30, 2024. That figure is a combination of four sources:
Electric Operations Fund
Electric Capital Reserve Fund
Electric Rate Stabilization Fund
All Electric Capital Project Funds
Within that total, the Electric Rate Stabilization Fund held $13,004,083.
What this means for residents
For households, the reduction equals about $6 off a monthly bill. Some have compared that savings to this year’s property tax increase, but Miller stressed the two are unrelated.
“The utility funds are internally funded,” he said. “What somebody pays on their electric bill goes to the electric system. Property taxes cover services like police, fire and streets. They are completely separate.”
Bills can also be confusing with line items for riders, stabilization charges and wholesale costs. Miller said the city will continue to explain the changes as clearly as possible, but emphasized that the bottom line is simple: rates are going down.
The next step: public hearing
Miller emphasized that the reduction is the result of careful planning and not a sudden decision. Booth & Associates was hired last fall to prepare the study so the city would be ready when the debt was paid off.
The next step is the public hearing on Oct. 7. Any resident may attend, speak, or ask questions. The mayor will open the comment period, swear in speakers and allow them to address council directly.
“If nobody has major objections, council may adopt the reduction that night,” Miller said. “If they do, the lower rates will take effect on Oct. 15.”
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