Consumers are paying a lot more than they realize to prop up the renewable energy industry in North Carolina, even though a section of their bills supposedly lists the cost.
That’s the contention of Rep. Chris Millis, R-Pender. Last week he introduced a bill requiring a study of the actual subsidies and incentives renewable energy producers receive, some of them buried in base rates. House Bill 745 should lead to more transparency, he says, and urge an honest evaluation of whether those subsidies are worth the added cost to ratepayers.
The transparency provision may not be the headline-grabber in H.B. 745. The sections that will draw the most fire from the industry would freeze, scale back, or eliminate costly state regulations that require electric utilities to make renewable energy, including solar and wind, a larger and larger share of their total fuel mix over time — the Renewable Energy Portfolio Standard.
If the bill passes, the REPS would remain at 6 percent of state retail sales instead of jumping to 10 percent in 2018 and 12.5 percent in 2021. Purchase requirements would be fixed at 6 percent for electric co-ops and municipalities rather than rising to 10 percent in 2018. The increasing REPS mandate is only one government favor that has given renewable energy producers an advantage over traditional providers — and increased subsidies from taxpayers and ratepayers to the green energy companies.
But Millis said requiring the state Utilities Commission and public staff of the state Department of Environmental Quality to study, finally, how much the state’s incentives-laden renewable program actually costs, is essential.
He said the entire additional costs of paying for renewable energy aren’t listed on the renewable rider portion of utility bills. That rider is supposed to show exactly how much each consumer is paying to bring renewable energy to market. Requiring a study would clearly show ratepayers how much more they are shelling out to prop up the profitable renewable industry, he said.
Millis believes substantial costs associated with renewable mandates are being hidden in the base rate of bills, and “that’s a dirty little secret that needs to be fixed.”
For example, he said, utilities must maintain a shadow electric grid using traditional fuel sources that always operates even when its output is not needed. That grid is needed to dispatch power immediately when renewable power isn’t available because the sun isn’t shining or the wind isn’t blowing.
“The NC Ratepayers Protection Act will protect North Carolinians from the perpetual rate increases they will face if these uncompetitive energy mandates and carve-outs are left untouched,” said Donald Bryson, Americans for Prosperity state director for North Carolina.
“It is no surprise that our energy rates are climbing faster than the national and regional averages. The longer we wait to pass these reforms the more rates will climb, and competition will diminish,” Bryson said.
The North Carolina Sustainable Energy Association, a renewable energy advocacy organization, did not respond to a request for comment.
H.B. 745 also would amend state statutes to curtail the state REPS. That is a set of rules giving green energy producers favorable treatment. Critics say those benefits drive up costs for ratepayers and taxpayers.
The bill would shift a stated policy that promotes renewable energy development through a variety of incentives with a preference to seeking a “least-cost mix of generation.” Millis said that would be fairer to ratepayers who have underwritten many of the excess costs of renewable power.
The bill would freeze the rider placed on residential electric customers’ bills that helps utilities recoup the higher costs they must pay for renewable energy. The annual rider would stay at $12 instead of rising to $34.
Freezing the REPS mandate, and reducing the scope of standard contracts, also would ease the burden on ratepayers.
“In some of Duke [Energy’s] footprint, specifically the eastern part of the state, they’re already exceeding 12.5 percent, the reason being that a lot of that has to do with the standard contracts, and the fact that they’re forced to take the [renewable] energy,” Millis said.
Standard contracts guarantee fixed returns for renewable energy generators even when market prices drop.
Current law encourages utilities to enter long-term contracts — now set at 15 years — with small power producers. Under H.B. 745, standard contracts could be no more than two years in duration.
Duke Energy has pushed for shorter contracts because they would reflect current market conditions, allowing the utility to pass along savings to consumers when power prices drop.
The law also requires utilities to issue standard contracts to renewable facilities generating 5 megawatts of electricity or less. Larger generators must negotiate prices and receive no guarantees.
The proposed legislation would cut the requirement to issue standard contracts for facilities producing 100 kilowatts or less, which is one-tenth of a megawatt.
Duke Energy spokesman Randy Wheeless said the utility “is trying to talk to a lot of different stakeholders to get some sort of more comprehensive bill in the legislature” rather than H.B. 745.
“We think that a bill that includes a little bit from the various stakeholders probably has the best chance of passage in the General Assembly right now,” Wheeless said.
He was not enthusiastic about the provision in H.B. 745 freezing the REPS.
“We were part of the process in 2007 that established the caps,” and Duke is in good shape to meet them, Wheeless said. If the caps are altered, “I think we’d like to have input into that process.”
He agreed that forcing the utility to offer standard contracts for renewable facilities of 5 MW or less limits its ability to negotiate with small providers. “So a lot of solar in North Carolina tries to dip right below that 5 MW figure so that they can more dictate where the solar goes,” Wheeless said.
Under the federal Public Utilities Regulatory Policies Act, Duke must connect any facility that meets that qualifying criteria, even if the facilities are in remote areas that are difficult to connect to the electrical grid.
“As a result, I think we’ve seen a lot of solar crowd into the eastern part of the state where land’s a little cheaper. A lot of it’s been farmland,” Wheeless said. Duke has pushed for a competitive bidding process to have more say over where renewable facilities are constructed so they make the most sense for its grid.
Other sponsors of H.B. 745 are Reps. George Cleveland, R-Onslow, Jeff Collins, R-Nash, and Pat McElraft, R-Carteret.