House Bill 951 in North Carolina – What is it and What is Duke Energy’s Plan?
Posted: September 29th, 2022Authors: Haley Z.
House Bill 951 Energy Solutions for North Carolina (HB 951), an energy bill including carbon reduction requirements, was signed into law by North Carolina Governor Roy Cooper on October 13, 2021. HB 951 is divided into four parts that task the North Carolina Utilities Commission (NCUC) with the following:
- Take all reasonable steps to achieve a 70% reduction in emissions of carbon dioxide (CO2) from electric public utilities from 2005 levels by the year 2030 and to achieve carbon neutrality by the year 2050
- Authorize performance-based regulation of electric public utilities
- Proceed with rulemaking on securitization of certain costs and other matters
- Allow potential modification of certain existing power purchase agreements with eligible small power producers
The following sections provide further details on the contents of HB 951, as well as a summary of the plan outlined by Duke Energy (the largest U.S. electric company by megawatts produced) in order to comply with the bill and common concerns.
House Bill 951
Part I – CARBON REDUCTION/FUEL TRANSITION/DECOMMISSIONING
- The NCUC must develop a plan with the electric public utilities to achieve the reduction goals no later than December 31, 2022. This can include at a minimum power generation, transmission and distribution, grid modernization, storage, energy efficiency measures, demand-side management, and the latest technological breakthroughs to achieve the least cost path to carbon reductions (Carbon Plan). The Carbon Plan will be reviewed every 2 years at which time both NCUC and the electric public utilities will determine if adjustments are necessary.
- Any new generation facility shall be owned and recovered on a cost-of-service basis except that:
- Existing laws apply with respect to energy efficiency measures and demand-side management
- Solar generation has a 45/55 split, where independent power producers own 45% and utilities own 55% for new solar and solar + storage generation
- Ensure all changes result in an improvement on adequacy and reliability of the power grid.
- Retain discretion for optimal timing to achieve the least cost path to compliance. NCUC cannot exceed the determined goal date by more than 2 years unless a nuclear or wind energy facility is constructed, which would require more time.
Each electric public utility will develop a program and file with NCUC for approval for competitive procurement of energy and capacity from renewable energy facilities, requiring:
- Limited to facilities with nameplate capacity of 80 megawatts (MW) or less placed in service after the date of the electric public utility’s initial competitive procurement.
- Public utilities issue requests in aggregate amount of 2,660 MW which will be allocated over 45 months.
The North Carolina Department of Environmental Quality (NCDEQ) must develop a plan “to ensure adequate financial resources for decommissioning of utility-scale solar projects”.
PART II – AUTHORIZE PERFORMANCE-BASED REGULATION OF ELECTRIC PUBLIC UTILITIES
- The NCUC is authorized to approve performance-based regulation (PBR) upon application of an electric public utility; the application will contain a decoupling rate-making mechanism for residential customer classes, one or more performance incentive mechanisms (PIM), and a multiyear rate plan (MYRP), where:
- MYRP will be fixed in the first year and have a maximum increase of 4% in years 2 and 3; The commission must ensure a PBR is fair to electric public utilities and customers and will not “rate shock” customers.
- Within 60 days of the years end, the commission needs to review revenue, the PIM, and the decoupling rate-making mechanism to decide if any amount needs to be collected from, or refunded to, customers.
- PIM rewards need to include rewards or penalties based on sharing of savings, differentiated authorized rates of return on common equity, and/or achievement of specific policy goals.
- The NCUC will decide whether the PBR application is adequate; once it is in effect (maximum 36 months) they may decide to review the plan, hold public hearings, or adjust base rates or PIMs as necessary.
- Electric public utilities must file a report annually for earned return on equity, revenue, and adjustments based on PIMs, if applicable.
- By April 1 of each year, the NCUC files a report for steps they and electric public utilities have taken to comply.
PART III – Rulemaking
- NCUC was required to “establish rules for securitization of costs associated with early retirement of subcritical coal-fired electric generating facilities” within 180 days of the effective date of the section.
- NCUC will develop rules to determine costs at 50% of the remaining net value of the subcritical coal-fired electric generating facilities.
- NCUC will evaluate and modify existing standby service charges, revise net metering rates, establish an on-utility bill repayment program for investments, and establish a voluntary program for industrial, commercial, and residential customers to purchase renewable energy or renewable energy credits; entities who elect to purchase renewable energy bear the full direct and indirect costs and entities who do not purchase are not advantaged or disadvantaged from cost impacts.
Part IV – POTENTIAL MODIFICATION OF CERTAIN EXISTING POWER PURCHASE AGREEMENTS WITH ELIGIBLE SMALL POWER PRODUCERS
- NCUC was required to decide on rates to be paid by electric public utilities for a one-time option to modify certain existing power purchase agreements with eligible small power producers within 120 days of the effective date of the bill.
- Amendment negotiations are encouraged if they treat small power producers in a nondiscriminatory manner.
DUKE ENERGY CAROLINAS CARBON PLAN
As outlined in HB 951, each electric public utility must file a program for approval with NCUC. The Carolinas Carbon Plan is the program filed by Duke Energy Carolinas, LLC (DEC) and Duke Energy Progress, LLC (DEP). These two companies constitute Duke Energy in the Carolinas.
The Carolinas Carbon Plan includes 2 paths and 4 portfolios. The baseline Duke Energy established using 2005 data shows that approximately 76 million tons of CO2 were emitted. In order to reach the carbon reduction goals, Duke Energy must cut their CO2 emissions to around 23 million tons per year. Duke Energy specifically created the plan so that there are definite steps to take in the immediate future, but with evolving needs and technology, it allows for flexibility in the future. The figure developed by Duke Energy as part of the Carolinas Carbon Plan, shown below, displays proposed near-term actions.
In general, these paths will increase electricity costs to the consumer by 1.9% to 2.7% annually through the year 2035. Duke Energy will phase out all coal generation by the year 2035, and the remaining coal-capable units that continue to operate beyond these planned retirement dates will be dual-fuel units operating primarily on lower-carbon natural gas. The Carolinas Carbon Plan utilizes existing mature technologies, such as solar, pumped hydro storage, and dispatchable natural gas units. The new technologies which are incorporated throughout the four portfolios include onshore and offshore wind, large scale battery storage, small modular reactors, and nuclear reactors. Each of the four portfolios relies on natural gas from the Appalachia region to provide sufficient power.
The following figures created by Duke Energy outline the components of each plan.
Duke Energy will continue to collect data to better estimate customer costs and have a more definite plan going forward. HB 951 requires that the plan is reviewed every 2 years, meaning that Duke Energy will have another report in the year 2024.
Although HB 951 is a substantial step to reduce carbon emissions in North Carolina, many people still have concerns about this law, including customers, environmental groups, and electric companies themselves. A few of the most common concerns are:
- An increase in cost to customers.
- HB 951 lacks enforceability and the law seems to give the same power to companies as the NCUC.
- Although Duke Energy plans to cut CO2 emissions, they will still be permitted to burn natural gas, which leads to methane (CH4) emissions from both incomplete combustion and transmission leaks. CH4 has a 100-year global warming potential of 27-30 times that of CO2.
NCUC will accept written comments at any time regarding the Carbon Plan. To electronically submit a comment, you can use the link and reference Docket Number E-100, Sub 179, so the Commission knows your comment is related to the Carbon Plan.