North Carolina Senate Committee on Agriculture, Energy, and Environment
March 11, 2025
Transcript generated for The Carolina Journal by Otter.AI
NOTE: AI-generated content will contain errors in transcription


Speaker 1  00:07
Mr. Meyer, there he is. Hey, Spencer, Jack Jones from Statesville, sponsored by Senator Sawyer. Sonnet cook son, a Carter from Durham, sponsored by Senator Murdoch. And I may get some of these are first names wrong. Ava Lipson from Raleigh, sponsored by Senator Everett. Thank you for being here this morning. We hope that you learn a little bit more than a lot of your your fellow students in vacant school about how this system up here works. We're all old hat at it. We know what's supposed to happen, but we're glad to have you all here this morning to see how this goes. Okay, we have, we have one bill on the calendar for today, Senate Bill 261, energy security and affordability act. I think Senator Newton is going to be presenting the bill. Senator Newton, you have the podium. You Well,

Newton  01:09
good morning. Members, great to be with you this morning and offer you an opportunity to save North Carolinians billions of dollars, and we can do it in a very simple way, very straightforward. This bill that I'm offering to you today does only two things. Number one, it removes the interim goal associated with 951. In order to remove confusion about that goal and how the commission should should deal with that being in there. The second thing it does is it allows cwip construction work in progress, recovery incrementally as new base load units are built for the energy security and lowest price for our state. So let me, let me get into that. So in 2001 we passed House Bill 951 which was voluntary carbon reduction on our part as a state with sort of the under we believed that North Carolinians wanted to participate in carbon reduction as a state, but they didn't want to pay any price to do that, not at any cost. And so we built in a number of safeguards in the bill 951, as we marched toward carbon reduction, the most important is two guardrails. One is no matter what the commission chose. And by the way, the legislature tends to have a history of prescribing the next increment of generation, we decided not to do that. We'll leave it to the experts to decide the next increment of generation. But there are guardrails. Guardrail number one is it has to be least cost for North Carolinians, non negotiable. Got to be least cost. Number two, also non negotiable. It has to improve, I'm sorry, maintain or improve the reliability of our grid. Non negotiable. Everybody deserves 24/7 power. And then the overarching guardrail was reasonableness. We didn't want to ask our commission to be unreasonable, thereby hurting North Carolina's economy or hurting North Carolinians in the process of walking toward decarbonization. Well, what we found is that when you look at the modeling that that this interim goal drove, it drove the commission to be very short sighted out of a belief that that that interim goal may be as sacrosanct, is the 2050 carbon neutrality. And you know, 951 said 70% reduction in carbon by 2030 carbon neutrality on our grid by 2050 we built as much discretion into that interim goal, as we thought we needed to as a legislature, what we found, though, that modeling treated it as basically as sacrosanct as the 2050 goal, not quite because the commission did exercise discretion to extend the time period. In fact, instead of a 2030 goal, the Commission realized they had the discretion to move it to 2034 and our Electric Co Ops will tell you in their discussions and digging on the modeling, and what they told me was that change of four years alone save North Carolinians $4 billion so if you move the interim Goal four years, you save $4 billion so we asked the public staff, will you do a run model? Run for us? I know your model wasn't exactly designed for this, but we do a model run for us. What we would save North Carolinians, if anything, if we remove the interim goal, and the answer that came back was $13 billion we would. Save North Carolinians by removing the interim goal. And without removing the interim goal, what we're left with is a model that says to the commissioners, look, we are going to cut off natural gas. Let me back up one second. The model will pick natural gas and nuclear resources every time when allowed to do so, because they're at least cost. So what happened was that, since you can't build nuclear by 2034 and natural gas, you can. It's an incorrect assumption, but it was assumed that there would be no more natural gas availability in North Carolina by 2034 they constrained those two options in the model. So the model a lot was allowed to choose two small SMRs, small modular reactors, but it was not allowed to choose any natural gas after 2034 what that did is artificially drove decisions that were driving costs for North Carolinians higher and faster than otherwise necessary. Another constraint in the model is they said, You know what? 20 that interim goal is so important that we're going to charge a carbon tax for every metric ton of carbon after 2034 after that interim goal. Or, you know, kicks are supposed to kick in. So they charged in the model, $10,000 per metric ton of CO two emitted from any resource on our grid after, after the interim goal date. The problem with that is, there is nowhere in the law, nowhere will you find a carbon tax in North Carolina, and the carbon tax in the model was is 50 times five, zero times higher than the carbon tax the car that's been applied by the Biden administration, which was 100 and, I'm sorry, was yeah, 100 and in the modeling in terms of what's the least cost next increment a generation, we're going to charge natural gas $10,000 a ton for its emissions. When the Biden administration was only charging $190 a ton for the social cost of carbon. And then you know this legislature, if you recall, rejected the governor's attempt to join Reggie, the Regional Greenhouse Gas Initiative. Even Reggie in the latest auction, only charged $20 a ton for carbon emissions so that artificially constrained the choices our commission had was able to make. So what I want to do with this bill number one is clarify for the commission that we are not asking them to jam down uneconomic resources on North Carolinians because of this completely arbitrary, and I say arbitrary with respect to scientific impact. It's completely arbitrary to have a 70% by 2030 goal, and so if we eliminate it. It will eliminate the confusion in the modeling. It will allow the commission to step back and say, All right, that's gone. So let's model to 2050 which is still the goal, the goal in the in the statute. And that will open the door to a number of resources for which the door was closed when we had an arbitrary 2030 goal, so it just simply opens up other possibilities for the commission to choose from, and we lower cost and more reliability for North Carolinians. The last thing we want to do we've worked so hard to attract job creators to North Carolina. The last thing we want to do in our energy policy is overcome all the good tax reductions, all the good regulatory improvements we've made. And they look at us and say, You're too expensive. I can't put my manufacturing plant there. Look at Parkdale mills in Sanford. They closed in 2024 sending 74 people home without a job. And the reason they cited was high energy cost. So the second element of this bill simply allows recovery of construction work in progress. So if you think so, if, if we're asking a Duke Energy to take on the risk of building a large nuclear plant without this change in the law, they have to wait until the nuclear plant is completed and then find out whether they're going to get full cost recovery. Three and at that point, customers, North Carolinians are paying an ever increasing carrying cost on that plan. So by the time it goes into rates, a rate shock happens, because it drops all at once, and the highest possible interest carrying cost is going to have to be paid by customers. All this bill says is that this portion of the bill, if you allow incremental recovery, then customers will actually pay significantly less for the power plant. In the end, the base load power plant, because they're not paying interest like your credit card. If you're not having to pay that interest, it's a lot less expensive. So they'll just pay the little bit of interest that was accrued with the first tranche of work, the iron in the ground, if you will. And it's subject to annual commission approval, so nobody gets to fly under the radar, only if the Commission approves it and says yes, this cwip mechanism will, in fact, make the cost lower for customers only if they make that finding will this, this happen, and they'll be watching every year at a minimum. So those are, these are, those are the two provisions of the bill, and they are cost savings provisions, both of them. They're good for North Carolinians and they hurt nobody. They don't and they don't hurt the climate. So I think I suggest this is an opportunity for us to to lock arms and do what's right for North Carolinians. And I will tell you, you know, we've heard from two grid reliability experts talking more about reliability instead of costs, for a second, both NERC and cerc have testified in Ohio and North Carolina that one of the top risks to grid reliability, the 24/7 power everyone expects, is policy. Governmental policy is putting our ability to give you reliable power at risk, and what they ask for is more time. But they're being they're getting intermittent resources jammed into these grids, and it's deteriorating the ability of the grid to provide 24/7 power. In fact, they both testified that if you want 1000 megawatt, and I'm not bashing solar, there's a place for solar, no doubt about it, in our future. But they said, If you want 1000 megawatts of solar, you got to build five to seven times that amount. That means customers, if you want the benefit of 1000 megawatts of solar, they have to pay for five to seven times that. And when you look at the modeling, the modeling doesn't include the cost of transmission, interconnection. That could be 50 or 100 million dollars right there for a new solar field. So again, not to bash solar. I think there's going to be room for what it is good for, but what it is not good for is reliable 24/7 power. Just look at our last polar vortex. Solar contributed zero. Even though we got to second in the nation installed solar, and even if we built seven times the amount of that solar, guess what it would have contributed on a dark, cold morning, zero. So we need base load plants. We need what's called dispatch ability. We need plans that will run 24/7 and this bill recognizes that and says, commission, we're going to release you from this interim goal where you're having to make sub optimal decisions, bad decisions for North Carolinians. Take away that goal, you can look out to 2050 and you can make the least cost determination looking at 2050 modeling instead of 2030 or 2034 modeling. And you know, I've already heard the pushback of, oh, you're just you're putting higher cost generation on the grid. And what I would say to my solar friends who have already been out in the media saying solar is cheap, the sun is free. If that's true, if you're right, you have nothing to worry about. This commission will still be picking the least cost alternative, but they'll be able to look out to 2050 and consider all alternatives that can actually be built between now and 2050 and you know one last thing about this interim goal, and I'll take any questions. You've got 20 70% by 20 2030 is arbitrary, also in this sense, it assumes a linearity of carbon reduction. Well, if you reduce by 70% by 2030 then you're more likely to achieve your 2050 goal. Nothing could be further from the truth. You could literally keep carbon steady today all the way out, no changes to 2049 turn on multiple nuclear units, and suddenly you're in compliance with the 2050 goal. So I'm not saying we'll do that. I'm just pointing out to you there's no linearity in carbon reduction, and so we ought to give. Commissioners every tool they need to bring the least cost power that's reliable to North Carolinians. So with that, I'm happy to answer any questions.

Speaker 1  15:15
Thank you. Senator Newton, questions from the committee, Mr. Chairman, Senator Bergen, go

Speaker 2  15:23
ahead. Thank you, sir. And quickly, was asking a question. I always like to ask you a question, if I may this. And I kept hearing 2034, in there. And of course, you and I've had, and others have had conversations about base nuclear, if, if base nuclear was going on an approved site, the site that already had nuclear, and it was an approved plan somewhere, like, what's going on in Georgia, couldn't we fast track that between EPA and Nuclear Regulatory Agency? Why would? Why would they not fast track that, given those parameters that already exist. Thank you. Thank you.

Newton  16:06
Thank you. Mr. Chairman, great question. I hope so. It's more of a federal regulatory issue. But to think about it this way, this is not new technology. This is not novel technology. Even the SMRs are just kind of reduced sized nuclear plants like we've been operating. Let's talk about what we've been operating. Imagine the foresight of those who built the grid back in the 70s. They chose nuclear power, large scale nuclear power that had a 40 year design life, that 40 year design life has gotten a regulatory life now of 60 years I got an extension, a life extension on the original plants we built in the 70s, 80s to 60 years now we're applying as a state and at Duke Energy for another 20 years. So yesterday's technology in nuclear is good for up to 80 years of carbon free, 24/7 generation. It runs about 96% of the time. That's what we need more of on our grid. And I look forward to the fact that the world is waking up to nuclear. Frankly,

Unknown Speaker  17:24
Senator Mayfield, thank

Speaker 3  17:26
you, Mr. Chair. So Senator Newton, I think we all appreciate your efforts to reduce energy costs to customers. I think everybody, everybody shares that, and certainly with the the the costs for coal ash cleanup and and the some of the costs around the carbon plan. You know, we've, we've known that energy is going to get more expensive. So I really appreciate that. I guess I've got several questions. Mister Chair, thank you. So my first would be you, you explain that removing this interim deadline would give the Utilities Commission more flexibility in terms of getting to the right sources and getting to the right plan, the most cost effective plan. What can you say a little bit more specifically, what you anticipate the changes, for instance, to the current carbon plan might be, would it? Would it eliminate the renewables or push those out? Would it push out the gas plants? Would Duke Energy come back in and say, Okay, now we're going to build a big nuclear plant, which you just referenced, which we've never heard reference to before, at least since I've been in this body. What? What? What do you anticipate the changes would be to that plan? And just as a preview, I would love the ability to ask Duke Energy that quite that same question, but I'd love to hear it from you first,

Newton  19:04
so I don't have the answer to that question, except to say I'm completely agnostic about the next increment of generation. So far it is as it is least cost for North Carolinians and maintains or improves reliability the grid, you can surmise that it would be more base load than is able to be produced in the 2034 modeling. But the modeling has never been run. We've never run a model that goes out to 2050 and just asks without a thumb on the scale, so to speak. You know what's what's the least cost option here for North Carolinians? So that's yet to come, yet to be determined, and that's kind of why we're here. We've never had the opportunity to look at what the selection, how the selection would broaden if we go to 2050,

Speaker 3  19:51
follow up. Mr. Chair, follow up. Thank you. You said that. You asked the Utilities Commission staff, or maybe the public staff like. I can't remember public staff to model that out the cost savings. So they must have had some assumptions in there. Is it possible for that modeling to become for us to see that modeling, and for the advocates and maybe Duke Energy? I'm not sure Duke has seen it either. Could that modeling be made public

Newton  20:18
for purposes I know I have no reason to believe the public staff wouldn't show you every bit of that model,

Speaker 3  20:22
okay, if, okay, well, I'll just ask, then public staff, will you send us that? I don't know. I don't know who to ask for that, so I've just put Yes,

Newton  20:32
yes. Staff is saying yes. Great.

Speaker 3  20:35
Thank you. Thanks very much. And then I guess you know, the current plan, effectively, I mean, we blew through the 2030 date, and it's now sort of stands de facto in 2035 and I guess I I hear what you're saying about how you know, If you don't have an interim date, you could in in 2048 flip a switch on some new, big nuclear plants, and suddenly you're in compliance. That's a, it seems a pretty risky way to be anyway to get to the goal. I mean, it's, it's certainly, in my experience, you know, if you've got a long term goal, it's good, it's responsible, it's to set benchmarks in the middle. And so I guess I wonder, you know, could we look at, if the, if the staff is willing to model it? Could we? Could we run some models about different compliance dates and see what that does. I certainly would not want us to get to the late 2040s and count on a couple of big nuclear plants to flip the switch and have and have North Carolina be in the same situation that ratepayers in the state of Georgia were with plant Vogel, where that that plant ran over many years, and I think about $20 billion so I don't think there was any savings to customers in Georgia for that plan. I just don't want us to be in that situation. So, you know, I, I guess would, would there? Would you be willing to entertain a different interim date? I mean, at the very least 2035 since that's the de facto what the plan is.

Newton  22:27
The example of turning on a few big nuclears in 2049 was simply a hypothetical to explain that carbon reduction is not linear. It will depend on when an asset comes online. I think an interim date is destructive to least cost planning. We've now seen it. We don't need to do it again. We just saw it. Putting in that 2030 date, we gave the commission a lot of flexibility to ignore it, which they actually exercised by kicking it to 2034 or 2035 so they knew they had discretion, but they clearly don't feel they have discretion to ignore it altogether, because they told Duke in their order to meet the 2030 day as soon as possible. I mean, I'm sorry, the 70% the 70% reduction as soon as possible. When you tell a power company you are ordered to do this as soon as possible, sub optimal decisions will be made to race to some arbitrary deadline, and that'll be at the expense of North Carolinian. So I don't want anything we do to cause electric rates to rise unnecessarily. And there's not a science, there's not a scientist on the globe that will tell you we're harming the environment by moving to 2050 we can shut down North Carolina today entirely and walk away it will have no impact on the climate, because the climate is indifferent as to the origin of a carbon molecule, and we know that China and India and others are Building coal plants as fast as they can build them, because guess what? It's reliable, it's inexpensive, it keeps their grid secure. We're not doing this.


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