There aren’t many of us who could do without electricity. Nonetheless, we don’t have a say in who supplies it or what we pay for it. Who decides what a kilowatt should cost? And how does energy policy change that?

The North Carolina Utilities Commission is a seven-member panel that makes sure all public utilities provide reliable service in the most efficient and least costly way. Utility companies hold a market monopoly. The Commission provides the competitive pressure necessary to counteract that monopoly.

When a power company wants to raise its prices, it has to get approval from the commission. The process is called a “rate case.”

Jo Anne Sanford was chairwoman of the Commission for 10 years before stepping down in 2007. She said a rate case is essentially a giant audit, often taking months to complete.

“It's a judicial proceeding, and so there are discovery requests and answers, and accountants and engineers and economists. Tons of people pore over company records. I mean, it's like fire ants,” Sanford said.

James McLawhorn, chief Fire Ant, is the Director of the Electric Division of the Public Staff, the independent state agency that represents the consumers in rate cases. The Public Staff decides whether the power company really needs more money by checking whether the company is wasting money somewhere else.

“During the course of that investigation, we’ll be looking at the information that they are required to file, and we will be asking additional information,” McLawhorn said. “Every aspect of their operations is fair game.”

The Public Staff makes recommendations upon the audit’s completion, and the final decision is made by Commission members. Utilities can file rate cases whenever they want, but facing that kind of scrutiny, they don’t file very many.

North Carolina’s base rate, the price you pay per kilowatt hour, is one of the lowest rates in the country—around a dime. Out of every dollar, 30 to 40 cents goes to pay for the fuel used to make the power, 40 to 50 cents pays for the company’s operations – building, running, and maintaining the grid—6 cents goes toward company debts and 12 cents is profit.

While these numbers may imply a good return for investors, there is a good reason for it. Building power plants is a very expensive undertaking. Duke’s new unit at Cliffside will cost $1.8 billion, while nuclear plants are even pricier.

“They are growing companies. They need to acquire large amounts of capital, a portion of which is from the equity markets, and they need to be able to attract that,” McLawhorn said.

While state law guarantees power companies a “reasonable return,” it’s up to the Utilities Commission to decide what that number may be. Jo Anne Sanford says that’s usually one of the most contentious issues in any rate case.

This issue is likely to get even hotter in the future as the state confronts its need for more power and its aging infrastructure. Apart from Cliffside, North Carolina’s last plant was built in the 1980’s. In the meantime, the state’s population has grown. And residents are using more energy than ever. Appliances may be greener, but the average household has a lot more of them.

Sanford said she believes efficiency and conservation can help curb demand, but they can’t offset all of it.

”We're gonna need more basic power supply. And that's going to cost money -- and who knows how much money that's going to cost? Because these are very expensive, they're hard to site, expensive to build, capital costs are big,” Sanford said. “And it is a thing that must be done, I believe, for us to meet our energy needs going forward.”

The Utility Commission is also in charge of deciding whether to build new plants, and what kind of plant to build. Power companies propose new plants for the Public Staff to review and make recommendations.

Some environmentalists criticize the Commission’s mandate for least cost, saying the process doesn’t take into account for all the costs of energy, such as high levels of mercury in fish or health problems caused by pollution. Sanford said that the formula does include the cost of complying with state and federal laws, but the Commission’s real job is to implement policy, not to make it. That’s up to state lawmakers.

Guilford Democrat Pricey Harrison was an environmental advocate before she was elected to the House in 2004. Every session she files a slew of energy bills, but few see the light of day. Harrison says that this is because industry lobbyists tell lawmakers they will cost too much.

“It's a combination of being incredibly effective at their jobs. And I'm afraid there's the whole campaign contribution piece to it too. And that's a problem with a lot of the issues at the legislature, not just energy-related,” Harrison said.

The energy industry is a big donor, especially in the Senate. According to followthemoney.org, the industry handed out more than $800 thousand in North Carolina’s last election cycle. While they account for a significant amount of money, the energy industry is not the biggest contributor, ranking in 9th place in 2008, far behind lawyers, realtors and bankers. Still, energy affects all those groups, from the heaviest hitters on down. And,almost no one wants to pay more for power.