Legislators Pass Bill That Could Cost Ratepayers Billions
Yet again, Duke Energy has used the General Assembly as a way to make more money. This past March, former Duke Energy North Carolina state president – former Senator Paul Newton – introduced Senate Bill 261 that would cripple the North Carolina Carbon Plan, costing North Carolinians billions of dollars in the process.
This bill would become Senate Bill 266, misleadingly called “The Power Bill Reduction Act.” It has three important harmful elements: the first is that it removes the interim target dates for the NC Carbon Plan (a 70% reduction from 2005 greenhouse gas emission levels by 2030). Removing the interim target date means using more dirty fossil fuels for longer, which could cost ratepayers $23 billion.
Shifting Risk and Cost to Everyday Households
The second part would allow utilities to charge consumers for electrical generation plants before they are built. This practice is referred to as Construction Work in Progress (CWIP). CWIP is not new to our state; we’ve had a version of CWIP established for a while. This bill, however, created a “super” CWIP, essentially allowing utilities to charge customers for construction with little or no government oversight or approval.
Similar strategies have been used in other states and were very costly. South Carolina used this mechanism to fund a nuclear plant. However, building the plant went so over budget that it was abandoned – after the utility spent $9 billion of ratepayers’ money.
Finally, the bill shifts more of the cost of extra power from big businesses to regular households during peak demand – raising residential bills by $87 million statewide each year.
Charging For Energy Not Yet Produced
Many utilities in the United States are regulated monopolies. Even though Duke Energy is a publicly traded organization, it is subject to heightened regulatory standards through the North Carolina Utilities Commission (NCUC) and its Public Staff. The bill rates are determined based on an allowed return on equity (ROE), a percentage negotiated between Duke Energy, the Public Staff, and other stakeholders. The equity refers to generation owned by Duke Energy. This means that if Duke wants to increase the money they get from rates, they can either build more generation (increasing equity), or negotiate a higher ROE. However, CWIP is a shortcut; it allows Duke Energy to charge for generation before it would ordinarily be included in their equity.
Senators Phil Berger (R-26), Paul Newton (R-34), and Lisa Barnes (R-11) were primary sponsors of the bill. Senate Bill 261, the original version, passed the Senate with support from all voting Republicans as well as Democratic Senators Blue, Lowe, and Waddell. The House rolled the legislation into Senate Bill 266 with support from almost all Republican members as well as 11 Democratic members.
“Families Pay More So Industry Pays Less”
After the bill was passed by both chambers, Governor Stein vetoed the legislation, saying:
“This bill not only makes everyone’s utility bills more expensive, but it also shifts the cost of electricity from large industrial users onto the backs of regular people – families will pay more so that industry pays less. Additionally, this bill walks back our state’s commitment to reduce carbon emissions, sending the wrong signal to businesses that want to be a part of our clean energy economy.”
The House and Senate voted to override the Governor’s Veto, with Democratic Representatives Cunningham, Majeed, and Willingham voting against their constituents’ pocketbooks and against the environment. Instead, they voted for Duke Energy’s rate hikes and huge profits.
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