A bill moving through the North Carolina legislature could reshape how Duke Energy charges its North Carolina customers for electricity service and its infrastructure projects.
Senate Bill 559 would allow regulators to approve extended rate cases for Duke Energy of up to five years, potentially allowing multiple rate increases to fund projects over that time. The Senate finance committee approved the bill without dissent on Tuesday, according to WRAL.
Opponents say the bill would decrease regulatory oversight of Duke's plans and could leave customers on the hook for uneconomic projects, its rejected grid modernization effort, or the utility's estimated $9.6 billion-$10.6 billion coal ash clean up.
North Carolina's neighboring states have dealt with contentious, high-profile ratemaking proceedings in recent years, making environmentalists, consumer advocates and some lawmakers wary of Duke's new proposal.
Senate Bill 559 would authorize the utility to establish fixed rates under banding returns and a multiyear rate plan of "no more than five years."
The legislation would give the North Carolina Utilities Commission "flexibility" in setting rates and provide stability and greater access to clean energy and new technologies, Grace Rountree, Duke spokesperson, said in an email.
"The North Carolina Utilities Commission lacks the authority and flexibility to approve alternate ratemaking methods that enable utilities to enhance the customer experience, make the energy system smart and more secure, and keep energy prices competitive," she wrote. "This legislation gives the Commission more tools and greater flexibility, flexibility that has already been adopted in over 35 states."
But consumer advocates and clean energy supporters are concerned the legislation would make regulatory oversight of Duke's plans less frequent, which could translate into customers paying more.
"The fact that there's no consumer protections and this huge price tag hanging up there is extremely worrisome," Peter Ledford, General Counsel for the North Carolina Sustainable Energy Association (NCSEA) told Utility Dive. "We think that the multi-year rate plans shifts risks away from shareholders and to ratepayers."
In particular, critics are concerned that Duke could be approved for large or multiple infrastructure projects in one fell swoop — without regulatory oversight to ensure the costs are prudent.
"If the commission grants the plan, there are no guarantees of oversight of what they're investing in," Ledford said. "If they know they're going to have a rate plan of X millions of dollars, there is no incentive for them to drive those costs down."
Wary of weakened oversight
Critics say the multi-year rate proposal is similar to recent laws in other Southeastern states that loosened regulatory oversight on utility projects.
In 2015, Dominion Energy won a rate freeze from state lawmakers to fund its expected compliance costs with the Clean Power Plan. When the Trump administration rolled those climate regulations back, Virginia customers ended up overpaying by $425 million, according to the Richmond Times-Dispatch.
In South Carolina, utilities convinced regulators in 2007 to pass the Base Load Review Act, which allowed them to charge customers for large power plants before they were built. The companies used the law to charge customers $37 million per month for the V.C. Summer nuclear project — until they abandoned it in July of 2017 due to delays and cost overruns.
Those laws are "not entirely the same as the multi-year rate plan," Ledford said, "but it's pretty similar function."
Rountree did not respond to inquiries on how SB 559 differs from the Virginia and North Carolina laws. Ledford said the legacy of those policies shows that Duke's plan could backfire.
"And what happened [in Virginia] resulted in billions of dollars of over-recovery and then Dominion becoming so toxic politically that legislators who were running on platforms of, 'I'm not taking Dominion's money," he said. "It seems imprudent for North Carolina to move forward with this given the situations that we have in our neighboring states."
Lack of stakeholder process
Skeptical lawmakers also highlighted the speed at which the ratemaking changes are moving through the legislative process.
"While there was no formal legislative stakeholder process, we have and continue to be committed to gaining feedback from our customers and stakeholders on energy issues that affect them," said Rountree.
"This is a pretty significant change in the way the utilities commission handles rate cases and I don't think it's something that should be decided by a couple of committee meetings and a couple of floor votes," Rep. Pricey Harrison, D, told Utility Dive.
"This sort of change usually involves a sort of stakeholder process," said Harrison, who is one of the primary sponsors on a bill that would prevent Duke from passing coal ash clean up costs on to ratepayers.
"I don't know why [Duke] did not involve stakeholders," Ledford said, adding they meet with the utility about "everything under the sun" including much smaller legislative changes than what this bill proposes.
In this case, NCSEA was informed of the bill only a week before it was introduced.
"And even then, we did not have the opportunity to provide feedback or even see exact legislative language," he said. "It was just them telling us that they were going to pursue this."
The North Carolina bill has the backing of several lawmakers in the state, including the Senate majority president pro tem and the senior chairwoman of the House Finance Committee, according to local media. Those offices did not respond to Utility Dive's request for comment by the time of publication.
The Sustainable Energy Association and other stakeholders were limited to addressing only the securitization portion of SB 559, which would allow the utility to recover certain storm-related costs.
That provision seems to have broader support from lawmakers and environmental groups, said Harrison and Ledford.
The second portion of the bill could get a hearing in the Senate Agriculture, Natural and Economic Resource Committee as soon as Wednesday.