- NC Policy Watch - http://www.ncpolicywatch.com -

Now is no time for another giveaway to Duke Energy

[1]In any discussion of North Carolina politics and policy debates, it’s hard to overstate the footprint of a player like Duke Energy. That’s mostly because there is no other player like it.

Charlotte-based Duke is the largest investor-owned utility provider in the United States and while it is not technically the biggest corporation in the state, it clearly touches more lives more regularly – both directly and indirectly – than any other North Carolina-based private actor. It serves millions of customers as a monopoly electric and natural gas provider, employs tens of thousands of workers, spends millions and millions on advertising, underwriting public causes and political influence, and reaps billions in profits for shareholders. It has long enjoyed close ties with leading politicians of both major political parties.

And, oh yes, one other thing: no other private actor in the state plays a bigger role in the ongoing global environmental crisis that threatens the future of the human species and life on the planet as we know it.

In many ways, attempting to do battle with Duke is like taking on the Star Wars “empire.” As with other massive and ubiquitous entities (both public and private), one can never really “defeat” it; the best one can hope for, short of converting it into a publicly-owned and managed enterprise, is to keep it in close check via strong regulation and legislation.

And so it is that North Carolina consumer and environmental advocates find themselves engaged in a political light saber battle with Duke at the North Carolina General Assembly. As you’ve probably heard by now, Duke wants a new ratemaking regime at the state Utilities Commission [2] under which the amounts it charges its customers would be set for multiple years at a time.

The basic and not utterly unreasonable idea is that setting rates for multiple years at a time adds some predictability to the process and puts Duke in a better position to strengthen and modernize the state’s utility infrastructure – something that’s essential given the desperate need to rapidly transition to clean and renewable energy sources like solar and wind power.

As is so often the case with such proposals, however, the devil is in the details and Duke possesses tremendous capacity to overwhelm everyone else involved when it comes to debating details – especially when the audience is a group of legislators on whom it has a history of showering campaign contributions [3]. Indeed, to hear Duke’s lobbying team describe the latest of several versions of legislation the company has drafted (Senate Bill 559 [4]), the proposal ought to qualify Duke for some kind of Good Samaritan award.

A deeper dive into the facts, however, reveals the several less-than-inspiring findings.

First and foremost is the fact that multi-year rate plans can be a double-edged sword. While it’s conceivable consumers could benefit, a far more likely outcome is that consumers could easily find themselves regularly locked into higher bills than they ought to pay for years at a time, given the fact that the rates will be based in large measure on Duke’s own projections of its costs.

The second big problem revolves around what will happen to any excess profits the company reaps. In its lobbying efforts, Duke has made much of a provision it has inserted into the bill that would direct excess profits (amounts of money the company brings in that exceed a prescribed range) to benefit low income communities.

A closer look at the details of the proposal, however, calls the true usefulness of that provision into serious question.

First of all, the bill provides great leeway to Duke to decide what constitutes appropriate investments. The Utilities Commission could conceivably reject a Duke proposal, but that would merely set Duke up to make another try. The commission won’t be permitted to simply decide where the money earmarked for the benefit of low-income communities would go.

Even more importantly, each of the ways in which the bill specifies that the funds could potentially be allotted is extremely vague and subject to easy distortion by Duke.

For instance, the bill says that the funds could be allotted to “electric infrastructure investments in communities that will result in quantifiable and measurable benefits for low-income customers in those communities.”

Another provision says that the funds could go to “electric infrastructure investments in economically distressed areas or low-income communities that facilitate job creation.”

As a practical matter, however, both of these provisions could be interpreted to mean simply running a power line (or repairing one) in a low-income neighborhood. After all, everyone arguably benefits from new power lines and all such work creates jobs.

In other words, the bill would allow Duke to receive special credit for things it already plans and intends to do. This doesn’t amount to doing anything new or special for people in need; it’s a cynical mischaracterization of investments the company already plans to make.

A provision in the bill that would supposedly promote energy efficiency is similarly illusory.

The bottom line: Lawmakers need to: a) force Duke to sit down in a true stakeholder process that fully involves consumer, environmental and energy efficiency groups, and b) order a thorough and independent study of the proposal.

Both things need to occur before the bill gets close to becoming law.