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Big employers push back on Duke Energy rate bill

Posted April 17, 2019 3:53 p.m. EDT
Updated April 17, 2019 5:46 p.m. EDT

Duke Energy, located on S. Wilmington Street in downtown Raleigh. Photo taken August 17, 2018.

— Big companies across the state are against Duke Energy legislation that would let the energy giant recoup costs for major projects ahead of time and go before regulators less often.

Lobbyists for large manufacturers, industrial customers and Google spoke against a key section of Senate Bill 559 in committee Wednesday. Walmart, the state's largest private employer and one of its bigger electricity users, issued a statement saying the bill "could lead to unchecked electricity rate increases."

Duke has pitched the bill as a double-barreled modernization of the way North Carolina regulators set electricity rates. The North Carolina Utilities Commission would still decide whether projects, like coal ash removal and a multibillion-dollar upgrade to the state's power grid, are worthwhile for customers, but it could approve rate increases to pay for these things up to five years ahead of time instead of requiring the company to justify increases every year.

The legislation has powerful, bipartisan backing in both chambers of the legislature. Sen. Ralph Hise, R-Mitchell, said the multi-year rate plans would amount to "a smoothing process," avoiding jarring rate increases as the company recoups construction costs.

The Utilities Commission, seven appointees named by the governor and confirmed by the General Assembly, could stick with annual reviews if it preferred, sponsors have said.

"This bill does not increase rates," Duke Senior Vice President Alexander Glenn said Wednesday during committee testimony. "It simply, as the sponsors have said, gives the commission the opportunity to hear multiple plans."

Major customers were not convinced and said the bill, largely written by Duke, hasn't been hashed out by key stakeholders. Preston Howard, a lobbyist representing major manufacturers, said it would be "turning our system on its head."

"There are better options here," Howard told legislators. "We ask that you slow down."

The state's Department of Environmental Quality recently said Duke would have to excavate more coal ash ponds around the state, boosting what would have been a roughly $5.6 billion cleanup plan closer to $10 billion. With those costs and others coming down the pike, "now is not the time to loosen the regulator reins," said Sharon Miller, another lobbyist for large manufacturers.

Miller said the bill "would greatly minimize public voices." A spokesman for the Attorney General's Office, which participates in the rate-approval process, called the bill "a dramatic restructuring" and said staff is studying the bill and would be forwarding a number of questions to sponsors.

Wednesday's committee review was discussion only, but a vote is expected Thursday morning. The Senate is on spring break next week, however, so the bill won't be on the Senate floor until senators return.

Chris Ayers, executive director of the Utilities Commission's Public Staff, which represents the public in the rate-making process, met with bill sponsors after Wednesday's committee meeting. During the committee hearing, he proposed a number of changes, including an annual look-back to see whether Duke and smaller utility companies affected by the bill spent rate increases as planned.

Ayers also suggested an annual cap on rate increases. He said the Public Staff doesn't take positions on regulatory bills, but he'd been asked for suggestions. The Utilities Commission itself also doesn't take public positions on bills like this, its spokesman has said.

After meeting with Ayers, Sen. Bill Rabon, R-Brunswick, a bill sponsor and chairman of the Senate Rules Committee, said there weren't any hard-and-fast changes yet to the language.

Senate Bill 559 actually has two parts, and only the second has been controversial. The first deals with the way utility companies pay for storm damage, allowing them to tack riders onto customers' monthly bills to pay off debt taken out to cover those costs.

Last year, Duke rang up nearly $650 million in restoration costs in North Carolina alone from two hurricanes and a winter storm, the company said earlier this week.

Part two of the bill deals with the multi-year rate-setting process, allowing rate increases to be approved up to five years in advance.

Because of savings from the new storm recovery funding method, Hise said that the bill as a whole would mean "an overall reduction" in customer costs. He and other sponsors declined to split the bill in two so the storm part could be considered separately.

"I think the bill as a package works well for the state," he said.

A pair of Democrats on the committee, Sens. Mike Woodard, D-Durham, and Harper Peterson, D-New Hanover, said the measure needs more time and deeper review. The storm recovery section is complicated enough, Peterson said, but the second part is "even more difficult to understand."

"The public is taken out of this process by having to sit on the sideline for three to five years," Peterson said.

Multi-year approvals would save at least some costs, though. Rate cases are expensive slogs that proceed before the commission much like a court trial, with attorneys representing various factions and paid experts testifying under oath about the reasonableness of Duke's requested increases.

The company put the cost of a rate case two years ago at $2.6 million, and those costs are rolled into customer rates.

The annual reviews also handcuff the Utilities Commission in some ways, Duke argues. Glenn said the company reached an agreement with a number of environmental groups in 2017 on part of its grid modification plan, but the commission declined to approve it because members felt they didn't have the power to do so.

The commission said in that decision, which also dealt with coal ash cleanup costs, that the company could recoup costs for projects already underway, but would have to come back on future projects.

Changing that shifts risk from the company to rate payers, critics of the bill argue. In addition to large energy users, environmental groups and clean energy companies oppose the bill.

Bill supporters said repeatedly Wednesday that the commission would still have to approve Duke projects and that it wouldn't have to allow multi-year plans, leaving the key decisions in state regulators' hands.

"Whether they do this or they do not is totally up to them," Rabon said.

Rabon and Senate Minority Leader Dan Blue, another bill sponsor, both said they've heard general complaints on the bill, but the criticism has typically been untargeted.

"We just want to know where the specific areas of 'don't like' are," Blue, D-Wake, said.