by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
There are plenty of magical words in popular culture. Harry Potter fans know that “wingardium leviosa” makes things float and “lumos” makes light shine in the dark. Bugs Bunny fans know that “abracadabra” can turn you into an umpire and “hocus pocus” can turn you into a bat. Parents have tried for years to make “please” happen.
Did you know there are also magic words that can make your power bill go up? If you read my research brief today, you’ll see they were just used in the coal-ash cleanup settlement agreement between the Cooper administration, environmental groups, Duke Energy, and not ratepayers.
State law recognizes that “the rates, services and operations” of electric power utilities are “affected with the public interest.” That’s a handy summary of the fact that how big your power bills is and how reliable your electricity is are vitally important to your well-being.
Electricity is a basic human need, you see, not a luxury purchase.
So state law on electric utilities demands “adequate, reliable and economical utility service to all of the citizens and residents of the State” as well as “the least cost mix of generation and demand-reduction measures which is achievable.”
Now, your power company is allowed to be profitable to a point. What’s the state standard for how much your power bill should be? It is this: “just and reasonable rates and charges.” The North Carolina Utilities Commission (NCUC) is the state agency who makes that call.
That applies not only to rates, however. The charges are for things the power company has to invest in to help keep your power adequate and reliable, as well as for other things the state or federal government requires.
But even for construction costs, state law is clear: they have to be “just and reasonable and prudently incurred.” The NCUC won’t let the utility charge you for any unjust, unreasonable, and imprudent costs. And your power company doesn’t want to be stuck with those costs, either.
So in terms of approving higher electricity rates, those are magic words.
Look what is all over the rate section in the settlement agreement on coal-ash cleanup between Cooper’s DEQ, environmental groups, Duke Energy, and not ratepayers:
53. Stipulations Between Only the Parties to this Agreement Regarding Rate Recovery Proceedings.
a. DEQ and the Community Groups agree that closing the CCR impoundments at the Allen, Belews Creek, Cliffside, Marshall, Mayo, and Roxboro Steam Stations in accord with this Agreement (including the obligations imposed by the Consent Order contemplated by this Agreement) is reasonable, prudent, in the public interest, and consistent with law. This subparagraph applies only to the actions of Duke Energy in entering into this Agreement and assuming the obligations under this Agreement. For example, and without limitation, the agreement in this subparagraph does not extend, nor shall it be construed to apply, to the issues of (i) whether Duke Energy acted prudently and reasonably in the past, or (ii) whether Duke Energy prudently and reasonably performs its obligations under this Agreement. Nothing in this Agreement shall be taken as an admission of any imprudent or unreasonable actions by Duke Energy.
b. Nothing in this Agreement, including but not limited to subparagraph (a) above, shall be taken as an endorsement or opposition by DEQ or the Community Groups of recovery through rates of the costs incurred by Duke Energy implementing the terms of this Agreement or related Consent Order.
c. DEQ and the Community Groups shall not challenge or otherwise object in court or before an administrative body to the reasonableness, prudence, public interest, or legal requirement for Duke Energy to comply with the obligations imposed by this Agreement, related Consent Order, or as to the Agreement itself. …
As the research brief explains, this portends major rate increases on Duke’s customers. Duke officials estimate the cost to close the remaining basins at “approximately $8 billion to $9 billion” over the next 15 to 20 years. That’s up significantly from original cost estimates of $5.6 billion.
If you’ve got questions about how this came about, well, you’re not the only one.