More Problems with Energy Bill: Letter to Speaker Hackney
July 26, 2007
Speaker Joe Hackney
North Carolina House of Representatives
Raleigh, North Carolina
Subject: More problems in energy bill S 3 with serious ramifications for the public
Dear Speaker Hackney,
As various public interest attorneys and others continue analyzing Senate Bill 3 and amendments, we are finding additional serious problems and language, at least one contained within amendments passed earlier this week. Described below are four examples that have not been included in the debate thus far, but which must be addressed. Many other concerns are already on record with you and others in the legislature.
Very few of the problems raised by ourselves and dozens of other organizations have been discussed with any detail during House committee meetings thus far. Meanwhile, many House members have noted the complexity of the 27-page bill. Today, Utilities Commissioner Jim Kerr opened his 13-minute description to the House Finance Committee with the admission, “It’s a complicated bill.” It also represents the most important potential energy policy change in North Carolina in decades and our state’s first real response to the damage being caused by global warming.
We remain concerned that this highly complex legislation is being rushed toward approval before legislators and others can understand its ramifications for North Carolina. Several legislative promoters of the bill continue to falsely claim that negotiations this spring among a group of “stakeholders” yielded consensus, thereby smoothing the way for legislative approval. Obviously, such a process should not substitute for careful deliberation in the General Assembly. Yet that is what is happening.
In the House Energy Committee on Monday, a substantially revised version of S 3 was distributed to members 10 minutes after the meeting began. Although there had been a number of presenters to the committee, very little discussion occurred between members. Fifty minutes later, the bill passed on a voice vote. Yesterday, the Public Utilities Committee heard an introduction of the bill by legislative counsel, brief input from Duke Energy and two bill critics including myself, then passed the complex bill 20 minutes later.
Some lawmakers have publicly complained of pressure from leadership to speed the bill, along with a lack of clarity involving grossly conflicting interpretations of key financial and environmental measures.
We want to particularly bring to your attention the following problems that have only recently come to our attention:
1. FEDERAL REPS. Section 1 (§62-133.7(h)(2)&(3)) eliminates the consumer protection caps on the cost of the REPS in the event of a federal REPS. It obligates customers to pay for all of the costs of complying with a federal REPS, including avoided costs, with no caps to protect consumers. Avoided costs, as set forth by Duke Energy in matters pending before the Utilities Commission, represent the cost of fictional energy plants that utilities would not have to build because customers saved energy. Duke is attempting to charge customers these avoided costs for saving energy. The provision in S 3 strips the Utilities Commission of discretion in calculating and apportioning costs attributable to a federal REPS, and forces it to use avoided costs as a measure.
2. PAYING FOR SAVING. Section 4(a) (§62-133.8(d)) authorizes the Utilities Commission to impose an annual rider on customers which would be based on all actual costs of energy efficiency programs plus any incentives the Commission considers “appropriate.” This provision lacks a cap to protect consumers. Section 62-133.8(d)(2) b specifically authorizes “capitalization of a percentage of avoided costs.” In Duke’s Save-a-Watt docket now pending before the Utilities Commission, Duke has asked for 90% of avoided costs. Adding the actual costs and avoided costs authorized by Senate Bill 3, customers could pay MORE for not using electricity than for using it. (Again, the statute doesn’t guarantee payment of avoided costs for costs saved by the NC REPS, but it specifically authorizes the Utilities Commission to grant them, an authority now lacking).
3. COSTS TO TAXPAYERS: How much will the provisions below cost residential ratepayers – and taxpayers who must make up lost tax revenues?
- Allowing industries (but not low-income families) to opt out of efficiency programs (Section 4.(a);§62-133.8(f)).
- Reductions and exemptions for businesses and industries on privilege taxes and sales and use taxes on electricity and natural gas (Sections 10.(a) through 11.(e))
4. PLANT CANCELLATION COSTS: Last Monday’s amendment regarding Section 6. §62-110.1(f2) deals with reimbursement to ratepayers, in the event of plant cancellation, of profits already paid to the utility prior to a plant becoming operational. (NOTE: A separate contentious aspect of cancellation allows a utility to recover from ratepayers the construction and financing costs for the utility’s failed project, with potentially hundreds of millions of dollars in financing costs charged to ratepayers in the years PRIOR to plant operation). The language in part (f2) should explicitly direct that ALL profits charged to ratepayers must be returned to ratepayers. I am told that this is what is intended; it should be explicit, and not left as yet another discretionary item for the Commission.
According to press reports, Progress Energy lawyers drafted much of the bill, and it shows. Continued scrutiny increases our concern about dozens of passages so extremely vague, if not outright slanted in favor of the utilities, that there is a great risk of legal actions stemming from a variety of parties. Even more likely, the power companies will use their legal teams and influence over the Commission to exploit the many vagaries in language.
I urge you to ensure that this extraordinarily important shift in state policy not proceed without a full and careful review in the House. The bill is badly flawed, and the problems raised by various parties need resolution. Please do not allow a situation where more “skeletons” are found only after the bill is law, and thus to haunt the North Carolina public for generations.
If this bill cannot be substantially amended to resolve these problems before the House adjourns this summer, the downside of holding it for further consideration next year is nothing compared to the downside of passing a new energy policy for this state that is contradictory, vague, full of pitfalls, and an invitation to many years of unproductive legal wrangling.
Sincerely,
Jim Warren
Executive Director
cc. Governor Mike Easley
Sen. Marc Basnight
Rep. Paul Luebke
