The N.C. Senate passed legislation Wednesday regulating electric transmission lines that some Democrats and energy industry critics say will shield major power providers in North Carolina from competition.
Sen. E.S. “Buck” Newton, R-Wilson, primary sponsor of Senate Bill 635, told senators during floor discussion that there was no opposition to his bill from the state’s power industry. The measure was approved 42-4 and sent to the House.
The bill would limit who may obtain a certificate to construct a new electricity transmission line to public utilities. The bill redefines public utilities as investor-owned companies, electric membership cooperatives, joint municipal power agencies, and cities or counties furnishing electricity for public or private use.
“The federal government has said competition and competitive pressures are in the best interests of consumers,” said Sharon Segner, assistant vice president of LS Power. She believes Senate Bill 635 would trample the ability of out-of-state interests to build power transmission lines in North Carolina.
“I’m not going to really comment on that,” Segner said, when asked if it appeared the bill is a protectionist measure that will allow existing power companies to monopolize the market.
Newton said during Commerce Committee debate on Tuesday that nothing in his bill would prevent LS Power from becoming a public utility in North Carolina. LS Power is an employee-owned firm that describes itself as an “independent power company with offices in New York, New Jersey, Missouri, and California … a developer, owner, operator and investor in power generation and electric transmission infrastructure throughout the United States.”
The only thing the bill protects, said Newton, is low rates and ratepayers from out-of-state profiteers who potentially would squeeze a targeted return on investment from their project and then abandon transmission lines or refuse to upgrade them.
LS Power has generation facilities in South Carolina and Virginia. The company does not have a presence in North Carolina, but Segner said it has explored generation possibilities here in the past and “there very likely in the future could be marketing opportunities.”
The underlying issue to this debate is an order issued July 21, 2011, by the Federal Energy Regulatory Commission (FERC). It requires criteria and procedures to be established allowing regional transmission projects to be sponsored, built, and owned and operated by “non-incumbent” transmission owners if the state law allows such non-incumbent entities.
A non-incumbent entity would be one that owns electricity transmission lines but does not serve retail customers as a public utility. Third-party and joint-venture ownership of transmission would be proscribed under the bill.
“Our business model is to apply for state public utility authority and to be under the authority of the state,” Segner said.
“There appears to be no advantage to North Carolina ratepayers to allow this FERC ruling to go forward as it is, and it would be in our ratepayers’ and our state’s best interest to push this bill forward and make sure we have the lowest cost and greatest reliability” in electricity transmission, Newton said during Commerce Committee debate.
Because FERC sets higher allowable return on equity rates than North Carolina, there is a risk that without his bill North Carolina ratepayers would pay more for a transmission line, Newton said.
LS Power believes Newton’s bill “needs to be clear in the language because otherwise it could subject a new company to litigation once it hits the North Carolina Utilities Commission,” Segner said. “Some could try to turn the language into making it an anti-competitive [measure].”
Segner said North Carolina is “already fully protected with or without the legislation” being proposed. It has the authority to deny applications from unqualified companies.
Newton disagrees.
“If this bill doesn’t go through, then they [outside owners] would be in a position to, with only federal regulation, decide to build transmission lines through and in North Carolina, and our Utilities Commission essentially would have no ability to control the siting, the quality of construction, and ongoing maintenance,” Newton said during committee debate.
“You could theoretically have a situation where the investors had a return on their investment and made all they wanted to do, and they didn’t want to upgrade and could abandon it. These are some of the risks that the Utility Commission came up with,” Newton said.
“The facts don’t mirror up with some of that,” Segner responded.
“If anyone is to build transmission in the state of North Carolina they’re going to need to go through a CPCN [certificate of public convenience and need] process in order to get involved, and nothing has changed from that standpoint,” Segner said.
During committee debate, Sen. Dan Soucek, R-Watauga, agreed the state should respond to the FERC ruling, “but there seems to me to be an advantage to North Carolina ratepayers to have competition,” he said.
“If somebody can [install] a transmission line and lower the cost of capital in a better and more efficient way, and somehow benefits North Carolina ratepayers, and be prepared to be subject to the public Utilities Commission oversight, I don’t know why we wouldn’t encourage that,” Soucek said.
“I was not satisfied with those explanations” of why Newton rejected LS Power’s request to amend and add clarifying language to his bill, said Sen. Floyd McKissick, D-Durham. “It certainly struck me as being anti-competitive.”
“I do believe in the market power to determine who the players are as long as, again, you can do it within certain parameters” under Utility Commission oversight, said Sen. Dan Blue, D-Wake.
“If they’re [LS Power] not bothered by being regulated, we ought to figure out a way to bring them to the discussion,” Blue said. “And if they’re not competitive they won’t win out against the utilities in building power lines. And if they are they will make power service cheaper in the state.”
Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.