Let’s not avoid reviewing North Carolina’s exorbitant avoided-cost rates

Passage of House Bill 589 this year brought major changes to energy policy in North Carolina. Along with giving solar energy facilities a guaranteed full seat at the table for electricity provision in this state, it addressed some of the problems with how North Carolina implements the federal Public Utility Regulatory Policies Act of 1978 (PURPA).

Some, but not all. It addressed the lengthy fixed-rate contracts (still lengthy, but not quite as lengthy) and generous definition of qualifying facilities. It did not, however, do anything at all about North Carolina’s exorbitant avoided-cost rates.

Not only was such a reform already necessary, but also since HB 589 hinges the competitive procurement on avoided-cost, how much consumers ultimately end up paying for electricity under the new law will swing on how high avoided-cost rates are.

In my review of HB 589 as it was under debate, I recommended the following:

Study how to set North Carolina’s avoided-cost rates more in line with surrounding states’

Reforming PURPA terms (Part I) and transitioning to a competitive procurement process (Part II) is a significant reorganization of relationships between renewable energy facilities, utilities, and their customers. How much of it would help consumers? A lot would depend on how far below current avoided-cost rates renewable energy facilities are able to bid.

Why are North Carolina’s avoided-cost rates set so high? How much would it benefit consumers through lower energy prices and lesser rate increases by transitioning to avoided-cost rates more in line with other states’?

Especially if the set-aside under the competitive procurement process of Part II is so broad that it basically makes renewable energy facilities into an oligopoly, revisiting avoided-cost rates would be very important.

Montana just cut its avoided-cost rates, which were among the few in the nation higher than North Carolina’s. They cut them by 40 percent.

It can be done.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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