RALEIGH — Two leading legislative critics of tax incentives to the renewable energy industry have not taken issue with an unusual new program used by Duke Energy Progress allowing high-consumption electricity customers using traditional energy to claim their plants are powered by renewable sources.
Neither House Majority Leader Mike Hager, R-Rutherford, nor Sen. Bob Rucho, R-Mecklenburg, expressed concerns about Duke Energy’s Green Source Rider program during a Jan. 5 meeting of the Joint Legislative Commission on Energy Policy.
The initiative, approved by the state Utilities Commission in 2013, allows big electricity users to pay a premium when placing new sources of costlier renewable energy of their choosing on the power grid.
Duke Energy either adds renewable power from one of its sources or negotiates a deal with a renewable company. The Duke customer could purchase as much as 100 percent of the energy it uses from Duke’s less expensive coal, natural gas, and nuclear sources while claiming its operations instead are fueled by renewable power.
“The Green Source Rider is a voluntary pilot program,” Kendall Bowman, Duke Energy vice president of regulatory affairs and policy, told members of the legislative commission.
Participants’ power bills “will represent the premium associated with renewable energy,” Bowman said. “These Green Source Rider customers are willing so that they can offset some of their load with renewable energy, paying a premium for the power.”
Likely participants in the program include universities, data centers, large manufacturers, and industrial plants, she said. To date, three customers have signed on. Program rules prevent disclosure of the participants’ names without their consent. Google is the only customer to go public.
The rest of the customer base “is held harmless” from paying the higher rates for new renewable energy sources brought onto the power grid, Bowman said.
Duke Energy Carolinas entered into an agreement with Google for Cypress Creek Renewables, a California firm, to build a 61-megawatt solar facility in Rutherford County expected to go online in late 2017, she said. The solar facility would offset the electricity demand for Google’s new data center in Caldwell County, 50 miles away near Lenoir.
“I think this is a great project,” said Hager, a former Duke employee who represents the district where the solar farm is being built. “It doesn’t impact taxpayers. It doesn’t hit ratepayers. If someone wants to pay more for electricity then they can pay more for it. That’s the free market solution for this.”
“I don’t know enough about that to comment. I’m not chairing this committee anymore,” Rucho said when asked if he agreed with Hager, who is one of the co-chairmen of the Energy Policy commission.
As Carolina Journal has reported, when Google announced the deal it said the agreement allows it to purchase solar power “in enough volume to power one of our data centers.”
Some critics have said such promotions are deceptive, as they suggest the large facilities are connected directly to the renewable sources but in fact they are getting electricity from the grid that powers other utility customers. Google did not mention that the entire Caldwell County data center complex would not receive any of the new solar power. It will continue to receive all of its power from Duke Energy’s traditional fossil fuel/hydro/nuclear mix.
Carolina Journal also reported other potentially deceptive claims from large energy users that are not part of this rider program.
Amazon says its data center near Dulles International Airport in northern Virginia would be powered by a wind farm under construction near Elizabeth City when, in fact, it will not be connected to that wind farm. Apple claimed its data center in Maiden, N.C., is 100 percent renewable-powered even though it purchases all of its energy from Duke and the utility’s traditional fuel mix primarily of coal, natural gas, nuclear, and hydro.
Bowman said if the green source rider program is successful, it could be rolled out to other customer classes and possibly “other jurisdictions.” The program is not offered in Duke Carolinas’ South Carolina market.
The enrollment period is scheduled to end at the end of December 2016, or earlier if 1 million megawatt hours of new renewable power is brought online. Bowman did not say how many new renewable megawatt hours are currently in use or scheduled, but said it is likely enrollment will extend to the end of the year.
Bowman and Sam Watson, general counsel of the Utilities Commission, also gave an update on Duke’s rate increase case.
Bowman said the typical Duke Energy Progress customer using 1,000 kilowatt hours of power per month would pay $1.59 less when all the increases and decreases of fuel costs, taxes, and various riders are tabulated. Watson said the decrease was $1.52, going from $36.43 to $34.91 per month.
Watson said a decrease in fuel costs, mostly in natural gas, resulted in a $5.64 decrease in that average customer’s bill.
But the cost of the Renewable Energy Portfolio Standards that requires utilities to purchase increasing amounts of renewable energy went up 34 cents, from 83 cents to $1.17 per month. A Demand Side Management/Energy Efficiency Rider went up $1.95, from $4.26 to $6.21.
Riders allow Duke to pass various allowable costs to customers. The new Joint Agency Asset Rider for Duke Energy Progress’s purchase of generating assets from the North Carolina Eastern Municipality Power Agency added $1.83 to the average bill.
Rep. Jeff Collins, R-Nash, was critical of the energy efficiency rider, which was part of the same Senate Bill 3 legislation passed in 2007 that enacted the REPS.
“In short, and in layman’s terms, does this mean the average customer basically is paying $6.21 a month for the privilege of having your electrical supplier try to do things that incent you to use less electricity?”
“Yes,” Watson said.
Watson also said an 8-cent reduction in the average Duke Energy Progress customer’s monthly bill was due to tax cuts enacted by the General Assembly rather than energy cost savings.
“To be clear then, because of tax reform there actually has been a reduction in the cost of electric rates,” Rucho said.
”Yes, I will say that because of the further reduction in corporate income tax that was effective Jan. 1 of this year that that reduction was flowed through to customers,” Watson said.
Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.