North Carolina lawmakers have adjourned for the year without making technical changes to the state’s landmark new climate law, a blow for critics who say the measure contains drafting errors and ambiguities that could allow Duke Energy to avoid a fulsome transition to clean energy.
Asheville Sen. Julie Mayfield, a Democrat who helped craft the statute but was pushing for the technical fixes, acknowledged the setback. “That’s a big disappointment,” she said. “The law should say what it means.”
A compromise between Gov. Roy Cooper, a Democrat, and leaders from both parties in the Republican-controlled legislature, the law aims to cut climate emissions from Duke power plants by 70% in the next decade and to near zero by midcentury.
Yet the statute as written could be construed to give Duke as much power as regulators in crafting and refining the “Carbon Plan” to guide those emissions reductions, creating leeway for Duke to build dozens of new gas plants rather than dramatically expand solar and wind power in the state.
Numerous studies suggest a fleet of new fossil fuel plants would be costlier than renewables, prompting concern from large industrial customers such as textile mills, for whom electricity is a growing portion of operating costs.
“Various language … suggests that Duke has been elevated to ‘co-equal’ status with the Commission and has, in essence, veto power over its decisions,” wrote Kevin Martin, the director of the Carolina Utility Customers Association, in an October letter to lawmakers.
Other wording in the bill, clean energy businesses say, could allow Duke to own more than 55% of new solar resources or otherwise shut independent power producers out of the market. A nine-line clause appears to roll an existing green tariff program and two different community solar programs into one.
“Was it meant to be one program, or is it multiple?” said Peter Ledford, general counsel and policy director with the North Carolina Sustainable Energy Association, a clean energy business nonprofit.
That same provision says the program (or programs) must ensure “no cross-subsidization occurs,” whereby ratepayers who don’t elect to purchase offsite renewable energy don’t help foot the bill for those who do. That may be a difficult standard to prove.
“It is effectively impossible to prove zero cross-subsidization,” Ledford said. “We think it’s better to have language that says, ‘to the greatest extent possible.’”
Martin’s group and other industrial customer groups have also homed in on the law’s securitization section. Intended to allow Duke to retire its coal plants before they fully depreciate, then pay back investors with ratepayer-backed bonds, the passage may not be explicit enough for Wall Street. “If this provision is ineffectual,” Martin wrote in his October letter, “customers will be significantly harmed.”
As Sen. Paul Newton, Republican of Cabarrus County and former Duke Energy executive, shepherded House Bill 951 through the General Assembly, he sought to assure his colleagues about the measure’s intent, its wording notwithstanding.
In the Senate finance committee, he said extra verbiage on securitization wasn’t necessary. “We think it’s adequate,” Newton said of the existing language. “We’ve been given the opinion that it’s adequate.” If not, he allowed, changes could be made to that passage during the legislature’s 2022 short session.
Other matters, he told members of the rules committee, could be clarified as part of the legislature’s annual “technical corrections bill,” an amalgam of typo fixes that usually appears at the end of lawmakers’ session. That could include more precise language about Duke’s authority over the carbon reduction strategy. “The commission is the ultimate determiner of whether the plan gets adjusted,” he said then.
But on the legislators’ last day of session Monday, he acknowledged that no such bill was on the horizon. “Apparently not,” he said. The legislature adjourned later that day, voting to come back on Dec. 30 for limited business that could bleed into January.
In the meantime, the wording of the law could get its first test in the coming months, as regulators move to adopt securitization rules by April 11. Large industrial customers want the commission to get bond counsel to offer opinion letters about the adequacy of the statute as written.
“It is necessary for the protection of ratepayers to resolve this uncertainty now, on the front end, when a solution – to the extent one may be needed – can more readily be obtained either through regulatory or legislative means, or both,” wrote Christina Cress, counsel for the Carolina Industrial Group for Fair Utility Rates, in a filing with regulators.
Utility commissioners have also ordered Duke to submit a draft Carbon Plan by mid-May. “The commission is foreshadowing that it views it has the authority to approve this plan,” Ledford said. “It’s not coequal.”
But could the law, he added, “be strengthened to eliminate ambiguity and make the direction clear? By all means. Definitely.”
On Monday, Newton expressed both doubt that changes were needed and willingness to pursue amendments in the 2022 session — so long as they are truly technical and not substantive, altering the law’s intended impact.
The difference between technical and substantive is a judgment call, which is why lawmaker Mayfield is still working to get clean energy interests, Democrats, and Duke to decide on a limited number of fixes that can be addressed in legislation next year.
“There are going to be places where we don’t agree, but if we don’t agree, that’s probably not a technical correction,” Mayfield said.
Duke’s subservience to the commission is at least one area of agreement. “We just have to settle on the language that’s going to make that clear.”