Charlotte Business Journal: NCMA wants utility regulation issues addressed before it endorses Duke Energy-backed reform bill

John Downey, Senior Staff Writer with the Charlotte Business Journal (CBJ) is reporting today that The N.C. Manufacturers Alliance (NCMA) will not oppose House Bill (HB) 951, legislation that proposes sweeping changes to utility regulations in North Carolina, but the group has three issues that it wants to resolve with the bill’s sponsors.

NCMA President Preston Howard Jr. told Charlotte Business Journal that the organization and the Carolinas Industrial Group for Fair Utility Rates (CIGFUR) are committed to continue to work with the bill's leaders, Governor Cooper's team, and other stakeholders to address concerns with HB 951.

Howard said, "We will have some proposals on how to resolve our concerns and we will share those with the bill sponsors and stakeholders."

CBJ said that industrial manufacturers are concerned that the bill would weaken the N.C. Utilities Commission, require customers to bear all the risk on $50 million worth of preliminary work on a possible nuclear plant, and do too little to soften the rate impact of early retirement for Duke Energy coal plants that will still have almost $5 billion remaining in unamortized construction costs.

NCMA and CIGFUR has participated in stakeholder meetings with lawmakers, Duke Energy, solar industry representatives, and industrial organizations for months prior to the release of HB 951. The bill does not have unanimous endorsement or opposition.

According to CBJ's reporting, HB 951:

• Allows utilities to propose three-year rate plans that would increase each year to pay for demonstrable costs for some long-term projects
• Mandates performance incentives that could allow additional charges to customers to reward utilities for achieving specified policy goals and penalize them if they failed to achieve objectives
• Speeds the closing of some Duke coal plants
• Extends the competitive bidding system for new solar construction in Duke Energy's NC service area
• Authorizes state utilities to spend up to $50 million on early site planning for an advanced nuclear plant and charge the cost to customers
• Authorizes Duke to sell bonds totaling  up to $200 million to securitize the costs of early closings of Roxboro and Marshall coal plants (claiming an eventual cost reduction to customers)
• Mandates natural gas plant construction to replace most of the capacity from Duke Energy Carolinas' Marshall coal plant
• Strongly suggests that a natural gas plant should replace Duke Energy Progress' Roxboro coal plant

CBJ calls it surprising that the bill includes specific instructions for future plant construction at a time when Duke's controversial 15-year Integrated Resource Plans are before the commission. These specific instructions create some of the issues for NCMA and CIGFUR.

ISSUE ONE: Commission authority compromised

The directions for future plant construction "compromise the utility commission's authority to determine the amount and types of new generation that will serve customers in North Carolina," Howard told CBJ. "They outright neuter that authority and in some ways eliminate the ability we have and others have to participate with the commission as they weigh these decisions," he said.

NCMA and CIGFUR observe that the commission has the expertise and has handled energy generation decisions for years. They do not want that authority stripped away.

ISSUE TWO: Charging $50 million for early site planning of nuclear plant to customers

The issue of who pays the $50 million for early site work was also a point of concern during the stakeholder meetings. Howard says that Duke Carolinas customers are already paying hundreds of millions of dollars for preliminary work on the proposed William S. Lee nuclear plant that never got built.

"Now, on this $50 million, they want to put 100% of the risk on rate payers," Howard said. "We think there should be some sharing of those risks, and we will have proposals on how to share those costs."

ISSUE THREE: Securitization of costs for early closings of Marshall and Roxboro coal plants

Howard told CBJ that the $200 million Duke would be allowed to securitize for early plant closings "wholly inadequate when you consider that the full costs remaining to be paid will be $5 billion." NCMA and CIGFUR were shocked  that the securitization provision covers so little of the costs when the concept is to spread the cost to customers over 30 years and reduce the impact of rate hikes needed to pay those costs.

“I always knew securitization was going to be in the bill,” he told CBJ. “But we didn’t see an actual number — I don’t think any of the stakeholders did — until we saw the $200 million in the bill this week.”

This bill would leave billions in costs to be paid at the existing rate, not spreading the costs over time to soften the blow as will be done with the $200 million.

NCMA and CIGFUR will continue working with legislators and other stakeholders  to seek consensus on an approach to address their concerns.

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NCMA wants utility regulation issues addressed before it endorses Duke Energy-backed reform bill
John Downey • Charlotte Business Journal • Jun 21, 2021