Updated: Aug 19, 2022
Duke Energy and Energy Solutions for North Carolina
In early October, Governor Roy Cooper signed House Bill 951, or "Energy Solutions for North Carolina", a new energy law that calls for a state-level 70% reduction of 2005-level carbon emissions by 2030, and "net-zero" carbon emissions by 2050.
Among the provisions to achieve this goal, it gives Duke Energy control of all power plants in the state, and grants the state Utilities Commission the ability to work with Duke Energy to shutter coal burning power plants:
The Utilities Commission will decide which Duke Energy power plants need to be shuttered.
The state will replace the power from those plants with new renewable energy sources. The law requires the commission to pick the lowest-cost options to keep people's power bills as low as possible. Large-scale solar and other renewable energy sources will become key sources of power for North Carolina’s electric grid. For solar, the law says utility companies will be required to buy 45% of their solar power from smaller solar producers. Utilities, like Duke Energy, could generate 55% of the solar power on their own.
The law also changes the process of determining and approving rate increases. Traditionally, utility companies presented evidence of past spending to the Utilities Commission as a request to raise rates for compensation. For instance, under this structure, Duke Energy plans to raise residential rates 9.6% September 1, 2022 to compensate for rising natural gas prices:
The company’s other North Carolina utility – Duke Energy Carolinas – made its annual fuel filing in March. The company recently revised its Duke Energy Carolinas filing to reflect a January 2022 under-recovery on fuel costs; if approved by the NCUC, Duke Energy Carolinas residential rates would rise 9.6% in September to adjust for fuel and renewable energy programs, then decrease 1.3% on Jan. 1 when energy efficiency and demand management adjustments kick in.
Under the new energy law, Duke Energy is now allowed to submit multi-year rate increase requests based on planned spending increases, in order to reduce "regulatory lag,", or "the period of underearning that can occur between rate cases, according to Paul Patterson, an equity analyst with Glenrock Associates." Under this agreement, Duke Energy provides a budget for expected expenditures to the Utilities Commission for rate increase approval. If the revenue from the rate increase exceeds the actual expenditures, Duke Energy will refund the remainder to its customers. However, the new energy law allows Duke to earn 0.5% above its authorized return before it would have to provide a refund to consumers, which "could increase electric bills by $100 million a year," according to Kevin Martin, executive director for CUCA, a trade group for the industrial sector. Moreover, the multi-year rate approval could create a sizable lag for refunds to consumers.
Increased Investment in Renewable Energy
In response to the passing of HB 951, Duke Energy plans to double its "portfolio of solar, wind and other renewables by 2025", an investment in new technologies, infrastructure upgrades and expansion, and closing coal burning plants, an investment of at least $100 billion over the next 10 years. Rising inflation and increased investment spending over the next few years in the new multi-year rate increase plan "could lead to roughly 50% rate hikes" for Duke Energy customers, according to Martin.
While this may sound alarmist and difficult to predict, this rate approval process is unprecedented. Historically, Duke Energy raised residential utility rates at an annual average of 4.7% over the last 10 years, before raising them 5.3% last year, and proposing a 9.6% increase next September, an increase of 13.2% within a calendar year. These rate increases follow the historical process of reimbursement for past expenditures, and not the new rate approval structure, which will approve three-year rate increases to cover anticipated future spending. A 50% rate increase over the next five years to cover more than $100 billion dollars in increased spending and unanticipated rising inflation does not seem far fetched when all the data is viewed together.
No pun intended, but Duke Energy customers may feel they have no options to protect their household finances from rapidly rising energy costs.
If you own your home, you can lower your rates by increasing the energy efficiency of your home:
Upgrade your windows and all window and door seals
Replace filters regularly
Upgrade to nested thermostats
Replace your HVAC with an electric heat pump
Replace your water heater with a heat pump water heater
For this last option, recall that the new energy law also requires Duke Energy "to buy 45% of their solar power from smaller solar producers." This includes privately owned solar farms, as well as commercial and residential rooftop solar arrays. Duke Energy is compelled to assist homeowners in solar production by making the process as easy and inexpensive as possible, and so offers one of the best net metering programs in the country.
For qualified homes, solar panels can be installed with no upfront costs and a monthly payment lower than your current power bill, with only a facility fee to pay to Duke Energy. This means, as Duke Energy raises rates for everyone else, homeowners with solar just keep paying the same low thing....
If you're interested in learning more and exploring solar options for your home, please contact me for a free consultation. We will review your electric bill, your home's energy efficiency, and potential solar array designs for your home. I will answer all questions and help you make the best decision for your family.
Jamie Duncan, Solar Consultant, Charlotte-Mecklenburg, Cabarrus County, Iredell County, Union County, Gaston County, Lincoln County, Catawba County
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