Governor and SB 3: Utility Welfare
Posted by Daren Bakst at 4:22 PM
As I wrote over at EnvironmentNC.com, 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
- 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
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
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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