by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor | John Locke Foundation
"The fact of the matter is," said Gov. Pat McCrory two weeks ago, "if we don’t have reasonable and reliable and low electric rates throughout North Carolina, we’re not going to be successful in having the Carolina Comeback throughout North Carolina."
An official press release from McCrory’s office stressed the importance of reliable, low electricity rates to the state’s citizens and economy:
The lower electric rates this purchase should produce will save consumers money and make the region more attractive to job creators who want to take advantage of the region’s talented workforce and special quality of life.
The governor was lauding the passage and signing into law of Senate Bill 305, which allows the North Carolina Eastern Municipal Power Agency to sell its ownership in four power plants to Duke Energy Progress for $1.2 billion, reducing NCEMPA’s $1.7 billion debt to $480 million.
Since then another bill has come before the legislature that could save consumers money and attract job creators. House Bill 681, the NC Ratepayers Protection Act, could restore North Carolina’s focus on utilities providing consumers with least-cost electricity.
In North Carolina, electricity consumers have no choice in their electricity provider. In return for this guaranteed consumer base, the utility is expected to provide reliable power.
The utility was also expected to provide the least-cost reliable power, but that dynamic changed when state leaders passed the Renewable Energy and Energy Efficiency Portfolio Standards (REPS) mandate in 2007.
Among other things, REPS mandates are notorious electricity price inflators:
The Ratepayers Protection Act would do several things, including:
The fourth point is crucial to keeping electricity rates low and the Carolina Comeback ongoing. It also satisfies Gov. McCrory’s desire for a clear date in the near future to end the subsidies while protecting investors. As McCrory told WPTF’s Bill Lumaye last August,
I think it ought to be a systematic shutoff of what type of energy should be subsidized and there should be a clear rollout plan of when those subsidies stop. I did not agree with immediately cutting it off with no warning to investors who are investing in solar or wind or other types of power but I do believe there has to be a date in which we do shut it off and it’s got to be a clear date probably not within a long period of time from right now.
A very recent study estimated that the REPS mandate has already increased electricity costs in North Carolina by $276 million. The bulk of those costs are concentrated on commercial electricity consumers and residential consumers, and significantly less on industrial consumers.
This departure from least-cost electricity will get worse in a hurry as the REPS mandate quickly rises. Till this year the higher power costs were under the lower initial mandate of 3 percent. This year it doubled to 6 percent; by 2021 it will be 12.5 percent.
State leaders should never lose sight of the fact that the most important issue with electricity for the vast majority of North Carolinians is least-cost power available at the flip of the switch.
Click here for the Rights & Regulation Update archive.
You can unsubscribe to this and all future e-mails from the John Locke Foundation by clicking the "Manage Subscriptions" button at the top of this newsletter.