This is a critical year for energy advocates to make their voices heard regarding the future of clean energy and the future price of power in North Carolina, according to Rory McIlmoil of Appalachian Voices.
The regional environmental organization based in Boone is one of several watchdog, social justice, public interest and environmental organizations that recently announced the formation of the Duke Energy Accountability Coalition.
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The coalition announced its creation in time for Duke Energy’s annual shareholder meeting on May 7. Duke Energy, which operates across the Southeast and Midwest, has energy-producing assets throughout North America. In all, the investor-owned utility serves about 7.7 million electrical power customers in six states, in addition to another 1.6 million natural gas customers.
“There is a lot going on right now related to Duke Energy and at the state policy level,” McIlmoil said.
Among the subjects raised by the coalition is Duke Energy’s influence over policymakers and its lack of vision to reduce carbon emissions and transition to renewable sources of energy.
“Duke has a state-sanctioned monopoly, which inhibits choice and prevents competition and leads to higher prices,” McIlmoil said. “Duke is really just digging in to do everything they can to protect their business model. Our primary goal is to erode the stronghold utilities have over our energy future.”
Earlier this year, Duke unveiled a report to achieve a net-zero carbon plan that McIlmoil called “pure green-washing.”
Duke Energy responds
In response, Duke spokeswoman Grace Rountree said, “The more progress we make, the more extreme the activist community becomes. Duke Energy is a national leader in reducing carbon emissions and proud of our record of reducing emissions — 39% since 2005 and 8% just last year,” she said.
“We invite you to read our recent climate report to more fully understand what the path could look like to net-zero and some of the opportunities and challenges we expect. To meet these challenges, we are working with stakeholders to support research and development of new and emerging technologies.
“We are committed to constructively working with policymakers and stakeholders through the established process to achieve the state’s clean energy goals.”
Scathing assessment
However, the Energy and Policy Institute, a watchdog organization that promotes renewable energy, released a scathing assessment of Duke’s plan. The group said Duke’s plan relies heavily on natural gas expansion and unproven carbon-capture technology in addition to discounting the feasibility of renewable energy on flawed grounds.
Among the coalition’s policy goals is to weaken Duke’s monopoly by creating a more competitive energy market where smaller renewable energy providers can compete.
“If independent producers can compete against Duke, clean energy will win and prevent unnecessary investments in natural gas,” McIlmoil said.
Burning natural gas to produce electricity releases fewer greenhouse gases than other fossil fuels; however, it emits methane, which contributes to climate change.
Another objective of the coalition, McIlmoil said, is to reform North Carolina’s regulatory model.
“We need policies that advance more investment in clean energy and that focus on making it more affordable,” he said.
Deregulation connected to clean energy?
The coalition’s preference is a cleaner energy grid that moves away from large centralized power generation to a system that produces power from smaller plants operated by competitors.
The rates that Duke Energy charges customers are regulated by the N.C. Utilities Commission, a state agency. Electricity prices are based on the utility’s total costs of producing electricity, including fixed costs such as the construction of a power plant, operating costs and a guaranteed rate of profit.
Resource economist Harrison Fell of N.C. State University told CPP that if energy markets were deregulated, there’s no guarantee cleaner energy production will follow.
“In some deregulated markets in the central United States, there has been an influx of renewables, but (that’s) more because of geography,” he said. “The middle part of the nation is deregulated. But there are renewables because the wind is there. North Carolina is a different story.”
One concern, for example, is the “missing money problem” that may develop following deregulation. According to the theory, wholesale energy prices due to expanded natural gas production and competition are too low to cover the total cost of supplying power.
As a result, in a deregulated marketplace, the capacity to produce electricity will contract because energy companies may be reluctant to invest in new energy facilities due to low prices.
Fell said economists generally favor energy use prices that reflect the “real-time cost” of generating power.
For instance, when electricity is at peak demand, prices would increase since less efficient power plants are tapped to generate more costly power.
Currently, Fell said, rates based on the total costs of production incentivize power companies to build more plants whose costs can be passed on to customers through the regulatory process.
McIlmoil said there is some political will to reform the energy market in North Carolina.
Gov. Roy Cooper’s office released a Clean Energy Plan in September that seeks carbon neutrality by 2050.
Among the plan’s recommendations is that the NCUC establish a new rate and compensation structure.
In 2019, Duke Energy Progress applied for a rate increase that is equal to about $464 million in revenue, including $423 million for plant additions and changes. Duke expects the rate to increase power bills by approximately $17.29 per month for residents of the Piedmont and Eastern North Carolina.
Paying for Duke Energy’s coal ash cleanup
Duke Energy Progress has also applied for a rate increase that would add $8.06 per month to the typical residential customer’s bill in Western and Central North Carolina
Combined, the requests account for $259 million for costs associated with the closure and cleanup of coal ash ponds.
On its website, Duke Energy said that “for decades affordable electricity” was made possible by coal, and the cost of cleanup “is a responsibility we all share as consumers of electricity.”
Appalachian Voices and other organizations are challenging Duke’s request to burden electricity consumers with the costs. They estimate the cleanup of coal ash to reach $10 billion.
Fell said his preference is to see a tax on the production and use of energy that emits pollution, such as a carbon tax, and that the social costs of energy use should be shared by producers and consumers.
“I would love to see federal taxes on the known externalities of energy production,” he said. For producers, a tax may create an incentive to change from high- to low-pollution power sources, such as wind or solar. And taxing consumers based on power use would encourage households to consider home energy upgrades.
However, Fell said placing the cost of coal ash cleanup on consumers is different and should be decided by the courts since Duke was allegedly aware of engineering flaws in the design of coal ash collection systems that led to contamination.
Despite arguments to reform North Carolina’s energy market, Fell said Duke’s incentive is to maintain the status quo.
“In general,” said Fell. “Utilities want to be in the driver’s seat.”
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