ROCKY MOUNT — A proposed 14-percent rate increase for members of a municipal electricity-buying cooperative is sparking questions about the annual salary paid the agency's chief executive.

The rate committee of the North Carolina Eastern Municipal Power Agency recommended the 14-percent hike at a meeting in Rocky Mount last month. If approved later this month by the boards of the power agency and its management agency, ElectriCities, the rate increase is expected to raise electricity costs for customers of NCEMPA members by several hundred dollars annually. The power agency is made up of 32 cities and towns in eastern North Carolina, including Rocky Mount, Greenville, Elizabeth City, Edenton and Hertford.

Internet bloggers have been critical of the proposed rate increase, focusing their rage on ElectriCities CEO Jesse Tilton. The bloggers say Tilton is paid too much. They also hold him responsible for NCEMPA's increasing rates.

The Rocky Mount Telegram has learned that Tilton earns an annual salary of $438,043. ElectriCities' records show his total compensation package for 2007, including an automobile allowance and annuity contract contribution, was $458,002.

Samuel Noble Jr., the town manager of Tarboro and chairman of the ElectriCities board, said Tilton's salary is comparable with the CEOs of other electric companies.

"I know for a fact that his salary is less than the other (electric) co-ops," Noble said.

He also said Tilton's compensation was evaluated as part of a yearly study of ElectriCities' employee salaries.

That study, conducted by AON Compensation Consulting, states that Tilton is underpaid compared to other CEOs overseeing similar organizations of the power agency's size.

"AON Consulting determined that overall, ElectriCities' CEO cash compensation, while reasonable, is below competitive levels," the salary survey states.

Critics say Tilton's guidance of the power agency has not panned out so well lately. They point to NCEMPA's decision in 2004 to convert a portion of its debt from fixed-rate bonds to variable interest-rate bonds. Critics say this year's proposed rate hike in fact only would have been 12 percent — not 14 percent — if not for that decision.

Back in 2004, the power agency expected to save about $10.5 million a year from switching NCEMPA's fixed-rate bonds to bonds with a variable interest rate. Instead, the collapse of the subprime mortgage market caused those interest rates to climb unexpectedly.

The power agency's debt service payments are now rising $12 million a year, or equal to a 2 percent hike in the wholesale rate.

NCEMPA board members say Tilton alone can't be held responsible for the decision.

Fred Turnage, the former mayor of Rocky Mount who also is an ElectriCities board member, said it would be unfair to single out Tilton for NCEMPA's decision to switch to the variable-rate bonds.

"It is pretty standard practice to have variable-rate debt as part of a prudent financial strategy," he said.

Turnage also said a number of North Carolina entities — from airport authorities to health care organizations to publicly traded companies — decided to invest at least some of their portfolios in variable-rate bonds, whose rates can fluctuate depending on market conditions.

Noble also noted that financial advisers recommended converting the bonds.

"The investment bankers brought those proposals to us years ago," Noble said.

Kenneth M. Raber, senior vice president of ElectriCities Services/NCEMPA, said hindsight is always 20-20. But given the facts in 2004, it made a lot of sense for the power agency to convert some of its fixed-rate bonds. Fixed-rate bonds in 2004 had interest rates of 5.6 percent, compared to 3 percent for variable-rate bonds, he said.

"Who could have predicted the subprime (mortgage) crisis?" Raber said. "If the same set of circumstances (in 2004) presented itself today, we'd probably make the same decision. Unfortunately, it didn't turn out as planned."

Raber also said the conversion initially saved $10 million a year in interest charges, which helped prevent a potential electric rate increase for NCEMPA members in 2005.

All of ElectriCities' variable-rate bonds have been, or are in the process of being converted into fixed-rate bonds, he said.

If the rate increase is approved, the higher electric rates for all NCEMPA members would take effect Aug. 1.

Increases in the cost of coal, nuclear fuel, transmission costs and operations and maintenance expenses are factors in the proposed rate increase. The power-agency coal plants in Roxboro and Mayo use Central Appalachia coal, which has increased in price from $30 a ton in 2002 to more than $100 a ton today.

Increases in raw uranium prices also have contributed to overall increases in nuclear fuel costs. In the past, uranium typically sold below $20 per pound. Recently, it sold for $135 per pound.

ElectriCities represents cities, towns and universities that own electric distribution systems, providing management services to the power agency, as well as North Carolina Municipal Power Agency Number 1, which represents 19 cities in the Piedmont and foothills region of the state.

Henderson, a former writer for The Daily Advance, now writes for the Rocky Mount Telegram.