WRAL this week alerted people that higher electricity bills are looming. Duke Energy is seeking rate increases over the next three years of “10% in January 2024, then up another 4% in 2025 with a final 4% increase in 2026.” That’s 19% in three years.
Worse, the next round of ratemaking could end in power bills being twice what they are now. Testimony before the North Carolina Utilities Commission (NCUC) by utilities engineer Dustin Metz of the NCUC’s public staff estimated that “current rates will approximately double between now and the end of the company’s next rate case” (which would begin in 2026).
Make no mistake, however: spiking power bills will be the result of deliberate policy choices from Gov. Roy Cooper and the General Assembly and supported by media editorial boards such as WRAL’s.
Gov. Roy Cooper had been seeking to force a “Clean Energy Plan” with a desired result of “carbon neutrality” from electricity generation by 2050. In 2021 the General Assembly chose to put Cooper’s “carbon neutrality” aspirations in statute, but in making this decision they tried to hold cost increases down while ensuring grid reliability. After all, keeping costs low and ensuring reliable service are two critical aspects of power provision, but legislators knew they weren’t important to the governor or the 164 environmental or other “stakeholders” behind his plan. So the law requires the NCUC to chart the “least cost path” to emissions reductions with “least cost planning of generation” that would “maintain and improve upon the reliability of the grid.”
Rate increases became inevitable, however, once policymakers shifted from strictly least-cost, reliable electricity provision to seeking a political outcome (“carbon neutrality”) in power generation. The law allowed for the multiyear rate plans seen in Duke’s request, a change that meant “Electricity costs could go up quickly for consumers,” as Locke showed.
The only way to limit the pain of future higher power bills is if — and only if — legislators strictly ensure that the NCUC adheres to the law’s requirement to choose the “least cost path” and also uphold grid reliability. North Carolina’s electricity consumers need them to be vigilant.
With this round of rate requests, could it be that Duke’s just being greedy? It’s not that simple. No doubt Duke is looking out for its shareholders, but state law already guarantees a “fair return” to Duke’s shareholders no matter what — provided the company is under “sound management.” In other words, the law directs the NCUC to set “just and reasonable” rates in return for “adequate, efficient, and reasonable service” so that Duke shareholders can expect a profit for keeping the power on, unless Duke’s leaders squander it through bad management.
By law, Duke is going to make a profit. If something has changed to cause Duke no longer to expect a profit under current rates, then — unless that something is Duke’s own mismanagement — Duke will go before the NCUC to seek higher rates.
Has something changed? Most definitely. Directed by the law, the NCUC released its initial Carbon Plan at the end of last year. It starts by planning the closures of all of North Carolina’s coal-fired power plants — over 9,000 megawatts (MWs) of coal-fired generating units, or one-fourth on North Carolina’s installed capacity.
In the plan, the NCUC told Duke to “incur” costs for developing new nuclear generation and “plan for” adding natural gas capacity, but it straight-up ordered Duke to “procure 2,350 MWs of new solar generation.” That’s two and a half times more new solar than Duke has ever interconnected in a single year, and it came just a month after the NCUC ordered Duke to procure 1,200 MWs of new solar not related to the Carbon Plan. If the NCUC tells Duke to do it, then the NCUC will let Duke recover their costs in higher rates on North Carolinians.
It is very expensive to shut down working, paid-for power plants and replace them with new ones. It becomes even more expensive to shut down efficient working power plants and replace them with something less efficient. The initial Carbon Plan even discussed how adding new solar and wind capacity raises rates. Disregarding that fact, the plan’s early prioritization of new solar capacity over new natural gas plants would doubly add expense by building more costly, less efficient solar capacity which then needs extensive transmission upgrades in the hopes of making it feasible.
Duke told WRAL as much: “Jeff Brooks, a spokesperson for Duke Energy, said the extra revenue generated from increased rates will go toward strengthening the power grid and transitioning to clean energy.”
Brooks reiterated that 75% of the revenues would be used for grid upgrades. Who’s looking out for consumers?
A 19% increase in electricity rates just as the plan gets underway and potentially doubling of rates shortly thereafter — does that sound like the least-cost path to carbon neutrality and the best way to keep the grid reliable? In January, when Duke first made its rate-hike request, Locke’s Center for Food, Power, and Life asked:
If the utility has to (a) spike consumer bills right away in order to (b) rebuild the transmission system so as to (c) interconnect unreliable, nondispatchable renewable energy generation in part because it isn’t allowed to (d) replace reliable baseload generation (coal) fully with other reliable baseload generation sources (nuclear and natural gas), are we still supposed to think the plan is upholding its legal requirements? Are legislators?
The NCUC’s big hurry to have Duke interconnect such a large amount of new solar capacity to the grid will require an enormous capital expenditure. Ratepayers are going to pay dearly. Are legislators paying attention?