Tag Archives: Electricity

Yesterday in the General Assembly

May 2, 2013: A brief update on  legislative action:

Renewable Energy. The House Public Utilities and Energy Committee  did not take  up  House Bill 298 again (although it appeared on the committee calendar), but the Senate Finance Committee approved a Senate bill to repeal the renewable energy portfolio standard (REPS). Senate Bill 365 would sunset the renewable energy standard in 2023, but immediately caps the renewable energy portfolio  standard  at 3% of retail sales — a standard that both Duke Energy and Progress Energy have already met. (The  2007 legislation creating the renewable energy portfolio standard  required Duke Energy and Progress Energy to meet  3% of retail sales with renewable energy or energy efficiency measures by 2012 and gradually increased the target to 12.5% of retail sales by 2021.)  Senate Bill 365 keeps  specific set-asides for energy generated by poultry and swine waste  although   renewable energy  from those  facilities  (which are not yet in operation) will not be needed to meet a  3% REPS requirement.   The Finance Committee vote to approve Senate Bill 365 became contentious as the committee chair ignored a member’s request for a show of hands  and  called  a very close voice vote for the ayes. The Senate bill now goes to the Senate Commerce Committee. The House bill remains in the House Public Utilities and Energy Committee and could be brought up for another vote at any time.

Regulatory Reform. Senate Bill 612 passed the Senate, but only after several floor amendments. The most significant amendment removed language that would have eliminated the Neuse River and Tar Pamlico River stream  buffer requirements.  The bill still requires state environmental agencies to repeal all state rules that are more stringent than federal rules on the same subject. The bill now goes to the House.

Renewable Energy Repeal Fails Committee Vote

April 25, 2013

House Bill 298, the bill to repeal the state’s renewable energy portfolio standard (REPS), failed to win approval in the House Public Utilities and Energy Committee yesterday. (See an earlier post for  background on North Carolina’s  renewable energy standard and House Bill 298.)

Although the bill had the backing of conservative political organizations,   the Republican-controlled House of Representatives never seemed particularly enthusiastic.  The bill won approval of the House Commerce and Job Creation Committee two weeks ago by only a one vote margin even after the bill sponsor  revised the bill  to  wind  the REPS program down more slowly.

When the bill reached the Public Utilities and Energy Committee, it  had been modified again to push complete repeal of the renewable energy standard out three more years –from 2018  to 2021. A friendly amendment in committee made two additional changes to soften the  impact of repeal on renewable energy companies that  invested in North Carolina in reliance on the REPS requirement.  The amendment  removed language allowing electric utilities to use power generated by large hydroelectric projects  to meet the REPS standard (returning to language in 2007 legislation creating the  REPS requirement). The change was made to prevent large existing hydropower plants operated by Duke Energy and Progress Energy  from crowding out new renewable energy sources even before the REPS repeal date. The amendment also  extended the time allowed for  electric utilities to recover costs associated with  renewable energy contracts. Americans for Prosperity again spoke in support of the bill and  submitted a letter of support signed by  a number of other conservative political organizations.

In spite of those efforts, the motion to approve the bill failed by a vote of 13-18 in a committee dominated by Republican legislators.  Republicans voting against the bill included members of the House  leadership —  Republican Conference Chair Ruth Samuelson and  Rules Committee Chair Tim Moore.

The bill failed for a very practical reason — the REPS requirement has brought private investment and jobs to North Carolina at a minimal cost to consumers.  “Riders” on electric bills allow the utilities to recover any additional cost of using renewable energy; the riders have never approached  caps included  in the 2007 REPS legislation. The cost of solar energy in particular has fallen by nearly half as solar companies expanded operations in North Carolina in response to REPS incentives and those costs continue to fall.  (Duke Energy’s residential  customers now pay 21 cents per month to cover the additional cost of  solar energy.  In a rate case filed with the N.C. Utilities Commission  earlier this year, Duke proposes to take the residential  REPS rider to -1 cent. Although Duke Energy has proposed rate increases, those increases are  associated with the cost of conventional energy generation.)

At the same time, private  investment in response to the renewable energy standard brought jobs to the state. See  a 2013 report  by Research Triangle Institute/ LaCapra Associates,   The Economic, Utility Portfolio, and Rate Impact of Clean Energy Development in North Carolina,  for more on the economic impact of the  N.C.  REPS requirement and state renewable energy tax incentives. A  September 2012 clean energy jobs census by the N.C. Sustainable Energy Coalition  identified  over  15,000 jobs associated with clean energy companies.

Conservative political organizations like Americans for Prosperity have made  renewable energy standards a  target for repeal nationwide.  Given extremely low consumer cost and increased private  investment and job creation,  there was little in  the N.C.  REPS experience that could be used  as an argument for repeal.  Supporters of House Bill 298  increasingly had to rely on an ideological argument against energy subsidies in general.  That position has a significant weakness — conventional energy sources  (such as coal, natural gas, and nuclear power) also benefit from subsidies, but conservative  opposition  seems to focus only on subsidies for renewable energy.   Bill supporters  also cited  stories of high cost and renewable energy business failures in other states and countries.

Approving House Bill 298 would have required legislators to ignore  real economic benefits to the state  in favor of an ideological argument against renewable energy subsidies. A majority of committee members chose  reality.

N.C. Renewable Energy Update

April 10, 2013:  A little more detail on the new version of House Bill 298. (For some reason, it took a week for the version  approved  in committee last Wednesday to be posted on the General Assembly website).

Instead of  immediately repealing   the entire   2007 renewable energy portfolio standard (REPS)  requirement, the bill would cap the amount of electric generation  to be met by renewable energy sources at 6%  of 2014  retail sales and sunset the REPS requirement  in 2018. The 2007 legislation (Senate Bill 3) required the electric utilities to generate 6% of 2014 retail sales  using renewable energy sources by 2015 and then increased the REPS goal to 10% of retail sales by 2018 and 12.5% of retail sales from  2021 on. SB 298 cuts the renewable energy goal in half and the 2018 sunset means that  the electric utilities could abandon even the 6% renewable energy target after 2018.

Other changes:

●   The amount of the REPS requirement that could be met with energy efficiency measures would immediately increase from 25% to 50%

●   Existing hydropower facilities could be used to meet the REPS goal. Since both Duke Energy and Progress Energy generate a significant amount of electricity from hydropower facilities, the change may allow existing hydropower to crowd out new renewable energy sources.

● Removes the set-aside for solar energy. (HB 298 repeals a Senate Bill 3 provision requiring the electric utiltiies to supply  at least two-tenths of one percent of the electric power sold to retail customers from 2018 on through a combination of new solar electric facilities and new metered solar thermal energy facilities.) The bill keeps the Senate Bill 3 set-asides for energy generated by swine and poultry waste – although those  set-asides  would sunset in 2018 with the REPS requirement.

● Requires any contract between an electric utility and a renewable energy company to end by December 31, 2018 for purposes of cost-recovery.

Although the bill looks less like immediate repeal of the REPS requirement, the effect would be the same.  New renewable energy sources could be crowded out by existing hydropower and energy efficiency even before the REPS requirement ended in 2018.  Swine and poultry waste would continue to have a set-aside through 2018 — but uncertainty beyond 2018 would make construction of waste-to-energy facilities a very risky business. In the end, the bill would completely undermine the Senate Bill 3 goal of encouraging development of new renewable sources of energy in the state as a source of energy security and job creation.

Renewable Energy: Predictions (and Politics) Meet Reality

April 4, 2013

Yesterday in the North Carolina  General Assembly, the House Committee on Commerce and Job Development took up  House Bill 298. (For background on the bill, see an earlier  post  about the proposed repeal of North Carolina’s renewable energy portfolio standard.)   Rep. Mike Hager presented a slightly revised bill, but repeal of the 2007 renewable energy portfolio standard (REPS)  remains at the center of the legislation. The committee approved the bill on a very close vote (11-10);  two Republican committee members voted  with Democratic committee members to oppose the bill.

Discussion in committee set up an interesting conflict between the reality of North Carolina’s REPS experience and the politics of renewable energy.  Those supporting repeal of the REPS requirement   cite both  ideological reasons  (opposition to  energy subsidies in general and subsidies for renewable energy in particular) and fear that the higher costs of renewable energy will hurt consumers and damage  the   economy.  The problem for bill supporters is that the state has had five years of experience with the REPS requirement and none of the predicted economic  horrors have materialized.  Instead, bill opponents can point to  real economic benefits  in jobs created and  private investment attracted to the state –- at minimal cost to consumers.

Of the fifteen (by my count)  members of the public who  commented on the bill in committee, only three supported repeal of the renewable energy portfolio standard. All three represented conservative political organizations — two  speakers from Americans for Prosperity and  another   from the Civitas Institute.  One argument for repeal laid the responsibility for increased electricity rates at the feet of the renewable energy standard.  In reality, REPS costs have been  low and and continue to decline.  For a residential Duke Energy customer, the  fee (or “rider”)  to cover the additional cost of  meeting the REPS requirement  is now 21 cents per month and  falling.   Although Duke Energy has filed a proposed rate increase  with the N.C. Utilities Commission, the justification for the increase has been recovery of capital costs associated with conventional power generation facilities and improvements to transmission infrastructure  — not  the cost of renewable energy.

Dallas Woodhouse, state director of Americans for Prosperity,  and Brian Balfour from the Civitas Institute also argued that the  higher  cost of renewable energy hurts the state’s economy and leads to job loss.   Their  argument  seems to be rooted in a 2009  report on the  projected  economic impact of  North Carolina’s renewable energy portfolio standard  that was put out by  the John Locke Foundation and the Beacon Hill Institute (BHI)  at Suffolk University. The  Locke/BHI Report looked at two different scenarios and even under the more favorable of the two predicted  that:

“… North Carolina will lose 3,592 jobs, investment will decrease by $43.20 million and real disposable income will fall by $56.80 million by 2021. As a result, the state economic output measured in real state Gross Domestic Product (GDP) will be $140.35 million lower than without the mandate.”

That prediction was made  early in implementation of the state  REPS requirement and the 2013 reality looks very different.    The actual impact of North Carolina’s support for green energy:  $1.4 billion in new green energy investment, more than 15,000 jobs in green energy as of September 2012  and an increase of $1.7 billion in the state’s overall economic output.  (My  earlier post has  links to both a 2013  Research Triangle Institute/La Capra report on the economic impact of the state’s green energy policies and a green energy jobs census conducted by the N.C. Sustainable Energy Association.)

Why were the predictions in the  Locke/BHI Report so wrong?  The costs of meeting the REPS requirement have turned out to be much lower than  the report projected.  The Locke/BHI Report assumed that the electric utilities would need to go  to the maximum cost recovery  rider  allowed under the 2007 REPS legislation (Senate Bill 3).  The report also evaluated a second, even more pessimistic, scenario that assumed actual renewable energy costs would exceed the fee caps.  As it turns out, the  REPS  riders are nowhere near the  statutory caps and  the riders continue to drop from year to year.  Senate Bill 3 capped the  REPS cost recovery rider for residential customers at $1 per month for 2012; the  current  Duke  Energy  rider for residential customers is  21 cents per month. In March, Duke filed an  application with the N.C.  Utilities Commission to set the residential REPS rider for 2013-2014 at  -1 cent, which would result in a  rebate to residential customers.  Costs to  non-residential customers have also come in   below the Senate Bill 3 caps and will continue to fall under the riders proposed by Duke Energy for 2013-2014.

The twelve members of the public who spoke against House Bill 298 in committee represented renewable energy companies  with significant investments in North Carolina; large swine producers  investing in waste-to-energy projects as an innovative  way to dispose  of swine waste;   the Warren County economic development director who pointed to the benefits that solar energy development  has brought to an economically struggling  rural county; and a wind energy developer interested in the North Carolina coast.

Based on the committee discussion yesterday, House Bill 298 has the potential to cause serious heartburn for conservative legislators who are being forced to choose  between a real bright spot in the state’s economy and policy positions advocated by conservative political organizations. The bill still has three more committees to get through in the House; the next stop will be the Environment Committee.

Should N.C. Abandon the Renewable Energy Portfolio Standard?

Some members of the  N.C.  House of Representatives have proposed to do just that.   House Bill 298  (the Affordable and Reliable Energy Act)  would repeal  2007  legislation developed  — with support from the state’s major electric utilities — to increase  use of renewable energy sources and energy efficiency measures to meet demand.  Abandoning the renewable energy portfolio standard (REPS) would also mean walking away from the state’s  commitment to renewable energy and energy efficiency as a source of investment and  job creation.

In 2007, North Carolina became the first state in the southeast to adopt a renewable energy portfolio standard.  Session Law 2007-397   (or “Senate Bill 3”) set a two-tiered goal for use of clean energy to meet electric power demand. By the end of calendar year 2018, municipal utilities and electric membership corporations must use a combination of renewable energy sources and energy efficiency measures  to meet 10% of retail sales.  The  two major investor-owned electric utilities, Duke Energy and Progress Energy,  have a slightly higher REPS  goal of 12.5%  by 2021.  Greater use of  clean  energy sources reduces air pollution and greenhouse gas emissions, but Senate Bill 3 also identified renewable energy development as a way to improve the state’s energy security and generate private investment.

According to the most recent N.C. Utilities Commission report on implementation of Senate Bill 3, the electric utilities  have met the first  REPS milestone  ( 3% of 2011 retail sales). Aside from the environmental benefits, the REPS requirement  also appears to have met the goal of encouraging clean energy investment in the state.   A recently released  RTI International/La Capra  Associates study,   The Economic, Utility Portfolio, and Rate Impact of Clean Energy Development in North Carolina, found that North Carolina’s clean energy incentives (including tax credits, investment in energy efficiency and the REPS requirement) spurred $1.4 billion in project investment statewide between 2007 and 2012.   Investments in clean energy took a sharp upward turn in 2011-2012 as the first Senate Bill 3  milestone approached. Even after accounting for the  “cost” of state renewable energy tax credits,  the report found a net economic benefit to the state. A census conducted by the N.C. Sustainable Energy Association identified 15,200 full-time equivalent employees in clean energy jobs as of September, 2012.

The primary sponsor of House Bill 298, Rep. Mike Hager (R- Burke,Rutherford), has said that the renewable energy/energy efficiency standard should be repealed in the interest of lowering electricity rates for customers. There is a small add-on fee (a “rider”) that the electric utilities can use to recover the costs of meeting the REPS goal. Senate Bill 3  put caps on the riders, but also required the N.C. Utilities Commission to approve the actual amount as reasonable and necessary to cover the electric utility’s cost.   Senate Bill 3 capped the REPS  rider for residential customers at $1 per month;   the approved riders are now 42 cents per month for Progress Energy’s residential customers and 21 cents per month for Duke Energy’s residential customers. The riders have never reached the maximum of $1 per month and the actual  amounts  have come down from year to year.

The RTI/ La Capra study concluded that North Carolina’s clean energy incentives (including the REPS requirement) will  have little impact on rate-payers — and may be a net benefit in the long term. The benefit largely comes from reduced costs as a result of energy efficiency measures; energy efficiency gains  translate into new energy generation costs that can be avoided or delayed.

This will be an interesting bill to watch. Skepticism about renewable energy and energy efficiency seems to have become an article of faith  among some conservatives — which may account for the fact that the bill has 27 sponsors in the House. But the bill also has been given four House  committee referrals; the long path through the House likely reflects some counter-pressure on the jobs  and investment side.

One other note about House Bill 298 — it is difficult to know exactly what to make of this, but the bill changes the  definition of “renewable energy resource” to exclude wind energy and include peat and fossil fuels.