N.C. consumers could face hundreds of millions of dollars in extra electricity costs if the state sets new mandates for renewable energy use. A Senate committee will consider a bill Tuesday that includes those mandates.
Utility companies support Senate Bill 3, but it’s drawing fire from some environmental groups that support renewable-energy standards. Meanwhile, a Duke Energy executive said it’s hard to gauge how customers feel about the issue.
“Some of our customers are a bit uncertain about what kind of renewable resources they want us to use,” said George Everett, Duke Energy’s director of environmental and legislative affairs. Everett told senators in a committee meeting last week that some customers want small hydroelectric plants. Others prefer larger hydroelectric plants.
“Some of our customers say, ‘Build wind farms,’” he said. “Others say, ‘That would be fine. Just don’t build them near us.’ Some would have us use solar energy to generate electricity, but they’re not sure what we should do when the sun is not shining. Some of our customers say, ‘Why don’t you close those old coal plants and build some new, cleaner ones.’
“Some say, ‘Don’t build coal plants. They’re not clean enough. Build more of your highly efficient and reliable nuclear plants that have no air emissions.’ Others say, ‘Don’t build nuclear plants. They’re not safe, and they’re too expensive.’”
Other customers have different ideas, Everett said. “A few of our customers just say, ‘Don’t build any new plants at all — we all just need to be more energy-efficient,’” he said. “About the only thing I believe our customers agree on is that Duke needs to be sure they have power when they want it and that the price is competitive.”
The Senate Agriculture, Environment, and Natural Resources Committee could vote on the bill Tuesday. It would create a Renewable Energy and Energy Efficiency Portfolio Standard. That standard would require North Carolina’s large electric utility companies to use renewable energy sources to generate at least 7.5 percent of the electricity they sell in North Carolina by 2018. Electric cooperatives and cities that provide their own electricity would also face a renewable energy requirement.
“These renewable sources include wind power, solar power, and ‘biomass,’ energy from sources such as hog and chicken waste,” said Dr. Roy Cordato, John Locke Foundation vice president for research and resident scholar. “But the standard ignores what is clearly the cleanest and least expensive of the renewables: nuclear power.”
Electricity generated from renewable portfolio standard-approved sources typically costs about twice as much per kilowatt-hour as electricity generated from conventional sources such as coal and natural gas, Cordato said. “That means the renewable portfolio standard would subject utility customers to a hidden tax,” he said. “Electricity rates would be raised to pay for the extravagance of mandating costly electricity production, and the annual cost of this program would be significant.”
A consultant’s report prepared for the state shows customers could pay $50 million in higher bills after the first three years and more than $300 million a year by 2018, Cordato said.
The state’s electric utilities support Senate Bill 3, now that it includes provisions allowing them to charge customers more for the costs of building new electric plants. The bill would also allow utilities to factor in some costs of out-of-state plants used to provide electricity in North Carolina. Other provisions include phasing out the tax on electricity used in manufacturing and agriculture.
“We believe that this is the right public policy for the state,” said Gene Upchurch, vice president of Progress Energy. “It sets an aggressive target for renewables and efficiency, and we support that in the way that it’s done in this bill. It also includes protection for consumers in the form of a ‘cost cap.’ Second, it creates appropriate cost-recovery mechanisms.”
The head of a statewide manufacturers’ group says the bill strikes a “good, reasonable balance” between increased reliance on renewable energy and the need to keep electricity rates under control. Preston Howard of the Manufacturers and Chemical Industry Council of North Carolina cites the proposed three-year phase out of taxes manufacturers pay on electricity and natural gas.
“We will still see a net increase in costs due to this legislation,” Howard said. “However, phasing out these taxes will significantly mitigate the overall increase in costs that our state’s manufacturers will have to assume.”
Some environmental groups support the bill, despite their concerns about provisions the utility companies requested. “The first three sections of this bill — that we generally refer to as an REPS — make North Carolina a player in the modern global, national, and regional energy markets,” said Ivan Urlaub, executive and policy director for the N.C. Sustainable Energy Association.
Urlaub’s group and Environmental Defense support the bill. Other environmental watchdogs said they have too many concerns. “New financing schemes” in the bill could ease the process utilities use to build new coal and nuclear power plants, said Elizabeth Ouzts, state director of Environment North Carolina. “Given the significant societal costs of coal and nuclear power in enabling global warming and air pollution — as well as hazardous waste — we believe it’s critical that the state maximize its potential for renewable energy and energy efficiency before tipping the scales further toward new coal and nuclear power plants.”
The N.C. Public Staff, which represents customers before the N.C. Utilities Commission, also has concerns about the bill. The measure would require the commission to allocate “significant” costs to customers by electricity demand rather than by energy usage, said Antoinette Wike, N.C. Public Staff chief counsel. “This provision — even in its compromise form, which we’re glad to see — favors the industrial class of customers over residential and commercial classes.”
The bill is still a “work in progress,” said George Givens, the legislative staff lawyer who has coordinated amendments and revisions. “I was receiving language as late as five minutes ago,” Givens told senators during last week’s meeting. “I anticipate some additional work will be done on this bill between now and Tuesday. We’ll probably … be up to about version 30 by Monday night.”
“This is a very significant piece of legislation,” said Sen. Dan Clodfelter, D-Mecklenburg. “The bill has a very long way to go. It’s got to get through [the] Finance [Committee] here and also then still go over to the House after the Senate. So we’re not done yet, but based on what I have seen of the work folks have done to date, I’m confident that by the time this bill is put for a final vote, that it’s going to have been vetted as thoroughly as any piece of legislation I’ve ever seen since I’ve been here.”
Whatever form the final bill takes, it would do nothing to improve the climate, Cordato said. That’s despite the fact that renewable energy is touted as a way to battle global warming.
“One would think that for hundreds of millions of dollars a year in additional hidden taxes and all the forgone opportunities these taxes would generate, the citizens of North Carolina could expect quite a payoff in terms of reduced future global warming,” he said. “But there is no evidence to suggest that increased use of renewable energy would do any more than raise customers’ electric bills.”
“If North Carolina — by itself or even with all the other states in the union and all the other nations of the world — enacts this type of standard, there would be no noticeable difference in the climate over the next century,” said Cordato.
Mitch Kokai is an associate editor of Carolina Journal.