The Locker Room

Governor and SB 3: Utility Welfare

Posted by Daren Bakst at 4:22 PM

As I wrote over at, Governor Easley signed the utility welfare bill into law (SB 3).  Most people think of this as a renewable energy bill, but it does little for renewable energy.  Tell me whether this is a special interest bill:

- Renewable energy requirement would increase pollution (wood chips, which would be the primary form of renewable energy, is far worse than coal, even according to the state's Division of Environment and Natural Resources).

- For the global warming alarmists: Wood chips (a form of biomass) produce 26% more CO2 than coal.

- The bill will require North Carolinians to pay for the electricity of out-of-state residents.

- Risk of plant construction gets shifted from utilities to electricity customers.  As a result, utilities have little incentive to keep costs down or do things efficiently.  To make matters worse, the Utilities Commission's oversight over new plant construction is drastically weakened.

- Legislators and the Governor had a total of 0 estimates of the full costs of SB 3, yet they passed the bill.

- Like most legislators, the Governor knows so little about SB 3 he thinks that the bill deals with biomass fuels (biomass for electricity has nothing to do with fuel).  From a recent article: "Easley said he also is concerned about the environmental consequences of promoting biomass fuels."  It is possible the Governor may have just been paraphrased incorrectly.

- The estimated costs to customers, from the Utilities Commmission, for some, but not all of SB 3, is about $500 million a year or about $3.6 billion over 12 years.  The customer cap that is being discussed (the $34 for residential accounts) only deals with the renewable energy requirement--nothing else.  It doesn't cover the costs of the energy efficiency programs, any additional costs for customers paying for plants that are not yet operational (construction work in progress), etc.

- The energy efficiency requirements take money from taxpayers and then if the customers decide to take advantage of incentives (such as buying energy-efficient appliances), these same customers get money back.  This is supposed to save money and help the environment.  It fails to take into account the fact that customers take actions on their own.  These are big government nanny-state requirements.  

Did any legislator (or the Governor) wonder why the utilities all of a sudden like energy efficiency requirements?  There is a simple reason.  Due to SB 3, utilities now can recover for lost demand as a result of energy efficiency measures. 

The likely means of recovery will be through a % of what are called avoided costs (basically what the costs of plants would be if utilities had to build them).  Duke Power, for their Save-A-Watt program, is seeking 90% of avoided costs.  This means that on top of the incentives and administration costs for energy efficiency programs, customers would have to pay 90% of what plants would have cost.  SB 3 is critical for Duke's Save-A-Watt program because there was concern whether existing law allowed utilities to recover in this type of manner.   

NC WARN, an environmental group opposed to SB 3, wrote in a letter to Speaker Hackney, "Adding the actual costs and avoided costs authorized by Senate Bill 3, customers could pay MORE for not using electricity than for using it." 

This was a special interest bill that was rushed through the legislature, despite its magnitude and complexity.  The opposition to the bill came from everywhere, but that wasn't going to stop this bill.  Most legislators apparently don't think that a $500 million a year tax increase will hurt them--they figure most people won't see this is a tax.   

It is a mandatory "extra" charge on top of the regular charge for electricity use that has nothing to do with the necessary receipt of electricity.  If the $500 million weren't charged, customers would still would receive the same electricity.  How is this different from the gas tax that is such a big deal?   

SB 3 is a big tax and big government bill that doesn't even help the environment.  The Governor apparently thinks, like legislators from both parties, that special interests are more important than electricity customers.

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