Op-Ed by Jim Warren, executive director of NC WARN,
and Jon Sanders, director of regulatory studies at the John Locke Foundation
What would inspire a prominent free-market nonprofit and an assertive environmental nonprofit to join forces in a very public way? Mutual concern over policies that keep the cost of a basic household necessity higher than it ought to be – not a luxury good, but something no family should be without.
The industry in question is in the midst of great change, competitive breakthroughs and disruptive technologies that promise a greater range of choices to suit buyer preferences and lower costs.
But here, customers are captive to a system that protects the revenue stream of a monopoly provider.
We’re talking about electricity. North Carolinians have no choice in who sells them electric power. For the vast majority, that provider is Duke Energy, which after merging with Progress Energy became the nation’s largest electrical utility. Duke now generates 95 percent of all electricity used by state homes and businesses.
Over the years, both NC WARN and the John Locke Foundation have highlighted problems with the current disposition of electricity provision in this state. We realized that, even though we often disagree, we had some shared areas of concern. After months of talking – and listening – to each other, we’re convinced that these points of agreement could be focal points for reform.
We believe that ratepayers would benefit from increased electricity competition, that consumers pay dearly under Construction Work in Progress rules and that consumers would be further harmed should North Carolina expand CWIP.
Last year, polls by the N.C. Sustainable Energy Association and the Civitas Institute showed that North Carolinians overwhelmingly disliked paying more for electricity than they should and that they desire more choice over how and from where they receive electricity.
North Carolina’s monopoly model for electricity has the predictable effects: higher prices, resistance to innovation and an inordinate focus on winning over politicians and regulators rather than on having to win the business of customers.
Major changes are underway in electricity generation. Small-scale, on-site generation using solar, gas or other sources is increasingly becoming an option for businesses. The same innovative impulses that brought about a technological breakthrough in tapping natural gas are also at work seeking the next revolution in untold other sources.
Whatever advances are on the horizon shouldn’t be pre-emptively blocked by an outdated model.
That current model is problematic enough. What would make it worse is if the state expanded CWIP to allow utilities to charge customers for nuclear plants during years of construction and even if the plants never come on line.
Ratepayers in Florida are under such a “Super CWIP” policy, and they are paying a lot for it: $3.2 billion for CWIP charges for the halted construction of the Levy County nuclear plant and the premature closure of the Crystal River nuclear plant.
This “advance payment” regime is also hammering consumers in Georgia and South Carolina. Although the Energy Policy Act of 2005 authorized federal loan guarantees to cover most nuclear plant construction, Wall Street investment firms have maintained that anything less than a 100 percent unconditional guarantee isn’t enough to attract private investment. CWIP essentially guarantees the remaining portion.
The John Locke Foundation and NC WARN still don’t see eye to eye on many issues, of course. But we agree that CWIP and the absence of competition lead to higher electricity prices, which hit low- and moderate-income customers especially hard because energy costs make up a large share of their household budgets. Our organizations explored these issues in a pair of public forums in Raleigh.
Our collaboration is far more than an academic exercise. We believe that, in an increasingly polarized society, dialogue across differences not only can remind us of commonly shared values but also can produce solutions for longstanding problems. We share a vision for North Carolina as a national leader in energy policy, governed by reason and foresight and welcoming of competitive enterprise.
Respectful disagreement and debate are healthy in a democratic society, so we don’t begrudge our differences. Nevertheless, where agreements emerge, let reform start there.
Jim Warren is executive director of NC WARN, a climate-and-energy nonprofit based in Durham. Jon Sanders is director of regulatory studies at the John Locke Foundation.