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Environment

Bipartisan energy bill could reshape power production, climate change in North Carolina

Power plant in Goldsboro, NC.
http://www.flickr.com/photos/dukeenergy/11441208065/
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A Duke Energy power plant in Goldsboro

Late last week, North Carolina lawmakers announced they had negotiated a bipartisan energy bill. House Bill 951 is the result of months of backroom talks between Gov. Roy Cooper, and democrat and republican leaders in the general assembly.

What has emerged is one of those compromises that seems to make the politicians and negotiators happy, and plenty of other people unhappy. That said, there's some real changes that, if enacted, will likely impact how this state produces and pays for energy, and how that affects climate change in the coming decades.

WUNC spoke with Elizabeth Ouzts about the bill and its impacts. She covers North Carolina's clean energy transition for the Energy News Network. This conversation has been edited for length.


WUNC: So let's start with what Democrats and Governor Roy Cooper like about this bill: it puts, into law, his goals for dealing with the climate crisis by cutting carbon emissions from the power generating sector by 70% in the next decade. How would this bill do that?

Ouzts: The bill would cut global warming pollution from power plants largely by handing the task over to the North Carolina Utilities Commission. That's the entity that regulates Duke Energy and other public utilities. So by the end of next year, the commission must come up with a "carbon plan" that would meet the pollution reduction targets. And then the plan would get reviewed and updated every two years as needed. Along the way, Duke would propose and then the commission would review and permit new power sources to comply with the plan, more or less as they do now.

The exact details of the plan would, of course, be left up to the commission. But there are plenty of studies that can give us an idea of what this would entail.

It would mean more than doubling the amount of large solar fields we have in the state right now. It would mean adding a ton more wind farms, both based on land, as well as some offshore. Right now we just have one wind farm on shore, and it delivers power outside the state. So we'd need about 10-times that plus ocean based wind farms. And then something like 11 gigawatts of battery storage. That's the equivalent of about six to 10 nuclear power plants.

Another thing I think is worth mentioning here is that the seven member Utilities Commission has six people on it right now who were appointed by the governor, and Cooper has made a seventh appointment that the legislature will almost certainly confirmed by the end of the year. So I do think there's a lot of confidence from the Democrats who were negotiating this compromise that the Commission is going to develop and execute the carbon plan in good faith.

WUNC: One of the things Duke Energy and many Republicans really wanted — and was able to negotiate into this new bill — was upfront, multi-year ratemaking. Describe what that is and why it matters.

Ouzts: So traditional ratemaking is backwards-looking under the current model. Duke shareholders finance big new power plants and other capital projects. And if those investments are later deemed prudent by regulators during a rate case, shareholders get paid back with interest on those assets, and then they're guaranteed a set profit and told the next time they asked for rate adjustment.

But rate cases are long and complicated. And by the time they're done, it's usually time for the utility to ask for another rate case because they've made more expenditures. And the other problem with traditional rate making is it tends to favor building big new fossil fuel plants at a time when the climate crisis demands the opposite.

So upfront ratemaking over multiple years looks forward instead of backwards; it's a way for Duke and Duke shareholders to get paid in real time for costs that, for the most part, everyone agrees are worthy like modernizing the grid to make it more receptive to rooftop solar panels or installing self-optimizing sensors that can detect and repair power outages quickly. In this bill Duke could ask for permission from the Utilities Commission to get rate increases over a three-year period. Compared to traditional rate-making, you can see the obvious upside for Duke here.

This is what some critics are calling a blank check. So each year the commission would examine the company's earnings and make sure they aren't more than about half a percentage point above the set rate of return, but that would still allow them to earn about $72 million extra, without having to return that to customers. And if they under earned by even a penny, Duke then gets to kind of call the whole thing off and then go into the commission and ask for a general rate case.

This section of the bill is really what most people are saying is a huge win for Duke.

WUNC: So what do the clean energy industries and other environmental groups think of this bill?

Ouzts: Let's talk about the environmental groups first, because they've been a bit more vocal so far than the clean energy industry. Most of these groups are committed to a just, clean energy transition. That means they want to ensure that poor people who are disproportionately people of color — who have often borne the brunt of pollution from coal and gas plants — now get the benefits of clean energy and aren't stuck with energy bills they can't afford. And that's where many of these groups say this bill fails.

The multi-year ratemaking section lacks guardrails to limit the "blank check" effect. And it could really have an impact on rates that poor people would bear disproportionately.

Duke would also get to own most of the renewable energy developed under the bill, and that could keep prices artificially high and reinforce the company's monopoly status. So for many of these groups that up that adds up to just too much downside for poor people and little to no upside and no when it comes to adjust clean energy transition.

As for the clean energy industries, most of them have haven't said much. Obviously, this bill could represent a huge opportunity for them, you know, doubling or even tripling solar. This bill does require the 70% reduction to be met using a "least cost strategy." But that should work to their advantage because renewable costs are plummeting, and fossil fuel prices are rising or at best uncertain.

I think we'll see as this bill moves through the legislature this week exactly what the industry is going to be saying. But so far, I've seen one statement of very positive, overall positive support from the major nonprofit association of clean energy businesses and crickets from everyone else.

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