Originally in Charlotte Business Journal

October 26, 2018

N.C. Attorney General Josh Stein has signed on to a compromise that would tie Duke Energy Corp.’s proposed clean-energy bill credits for large customers to the costs regulators calculate the company’s utilities avoid when independent power producers provide renewable energy.

Stein’s office has argued that Duke’s Green Source Advantage program skirts the 2017 law that mandated its creation by proposing fees and charges that would effectively block large commercial and institutional customers from contracting with independent power producers. The Competitive Energy Solutions for NC Act said that such third-party contracting must be an option for Duke customers.

“Adopting the bill credit proposal ... would resolve a significant shortcoming of the (Green Source) program as proposed by Duke: that the military and public universities for which the General Assembly reserved capacity under the program have indicated they will not participate in it,” writes Special Deputy Attorney General Jennifer Harrod in a filing on Stein’s behalf. “If the .. program fails to attract military and public university customers, North Carolina will lose an opportunity to connect new renewable energy sources to the grid.”

Fixed price

The compromise proposal — worked out by the N.C. Clean Energy Business Association, UNC Chapel Hill and the Southern Alliance for Clean Energy — attempts to address that issue. It eliminates a complicated and variable method for calculating the bill credit such customers would receive, replacing it with a credit tied to the “avoided costs” that state regulators set for Duke Energy Carolinas and Duke Energy Progress.

The avoided cost for each utility in the state is calculated as what it would cost the utility to produce another kilowatt of power. The figure is set every two years by the N.C. Utilities Commission.

Under the proposal from NCCEBA, UNC and SACE, when a large user contracted for power from an independent renewable energy producer under the Green Source program, the credit would be fixed for up to 10 years at the host utility’s avoided cost at the time the contract was signed. If the renewable energy contract was longer (contracts of 20 to 25 years are common in the industry), the credit agreement would be “refreshed.” The credit would then be pegged for up to 10 years more at the new avoided-cost calculation.

Duke has not agreed to the compromise, but the utilities commission can impose it — or any other method for setting the credit — when it approves the Green Source program.

The credit proposed by Duke — and reworked some in a settlement earlier this year with Walmart Inc. — would not be a fixed amount. It is designed to change over time, and critics say that is one of its largest defects. 

High fees

It does not provide the customer with certainty about future savings, they say. That makes the program less attractive to customers. That is coupled with what many complain are high fees imposed by Duke on the program, and the problems have led several of the companies and institutions ostensibly targeted by the program saying they would not participate.

Walmart, which is one of the nation’s largest commercial consumers of renewable energy, resolved those issues for itself in the settlement it made with Duke. And Duke defends the bill credits as proposed in that settlement.

But other large users have not been enthusiastic.

Military officials have not yet weighed in on whether the latest compromise would make the program more attractive to them. Neither have Apple or Google LLC, which objected to the initial plan put forth by Duke.

The N.C. Sustainable Energy Association and the Public Staff of the N.C. Utilities Commission have not signed on to the latest compromise proposal, but have said they would not object to it.