North Carolina electric ratepayers would save a projected $849 million on their power bills over the next 10 years under legislation that begins to peel away some of the most favorable state mandates for the renewable energy industry.
House Bill 589 sailed through the Energy and Public Utilities and the Finance committees Tuesday. It will be on the floor Wednesday for a vote. Bill sponsors lauded its free-market principles. But some House members questioned the decision to fast-track technical regulatory reforms, which were nine months in the making but weren’t released until Monday.
“Any time you get Americans for Prosperity and the Environmental Defense Fund to agree to something you’ve worked some magic,” Rep. John Szoka, R-Cumberland, told Carolina Journal after the Finance Committee meeting. He and Rep. Dean Arp, R-Union, are primary sponsors of H.B. 589.
The conservative AFP and left-leaning Environmental Defense Fund were among eight organizations whose representatives urged passage of the bill during the Energy Committee meeting. No one spoke against it.
“What we’re doing is a paradigm shift from the current procurement method, and what we do with solar energy, to a new sustainable one,” Arp told CJ.
A federal law called the Public Utilities Regulatory Policies Act of 1978 requires states to buy renewable energy. Most of the details for implementation are left to the states.
North Carolina designed a lucrative scheme requiring electric utilities to give 15-year, fixed-term contracts to renewable energy producers. It also allows all renewable power facilities that generate up to 5 megawatts of electricity to get those contracts.
Solar energy facilities expanded rapidly as developers rushed to capture those benefits. North Carolina now has 60 percent of all PURPA-eligible solar and alternative power contracts in the nation, more than 46 other states combined.
As the costs of solar technology decreased, electric utilities forced to buy solar power under PURPA paid rates much higher than actual market costs. They passed the expense to consumers. A Duke Energy analysis found the utility is paying $55 to $85 per megawatt hour to buy solar power, even though the actual cost is $35.
By shortening contracts to 10 years, H.B. 589 would save money. Also, only facilities producing no more than 1 MW could get standard contracts, so fewer of them would be issued.
In explaining the bill, Arp and Szoka said a new competitive bidding process would save ratepayers money. Public electric utilities for the first time could solicit proposals from developers of potential renewable facilities and could reject those that didn’t meet market demand or would be built in unfavorable locations.
Utilities could reject bids that are higher than their “avoided costs” — how much the utility avoids paying to build or produce its own electricity by instead buying it from a renewable provider.
So solar developers would have to offer the lowest bid to get a contract. Otherwise, their projects wouldn’t be built with a guarantee the utility would have to buy its power as a feeder for the electric grid.
Some lawmakers had reservations about the bill.
“Smells a lot like 2007 around here lately,” said Rep. Chris Millis, R-Pender, a vocal critic of the combination of legislative mandates and subsidies the solar industry has reaped at the expense of ratepayers and taxpayers.
The General Assembly approved many of those incentives in 2007 after secret sessions of stakeholder groups to craft the legislation. Millis is concerned that a similar process was used this time, and no watchdogs were in the room to advocate for consumers.
Millis said he is still vetting the bill, and lamented the lack of time members were given to analyze the many complicated provisions.
Rep. Dana Bumgardner, R-Gaston, had a similar reaction.
“Whenever you have such a wide variety of groups that normally wouldn’t support a bill like that [yet urging its passage], there’s bound to be some stuff in it that needs to be gone over,” said Bumgardner. Legislators should get more time to analyze the bill, he said.