nuclear energy

HB 951, Modernize Energy Generation: what’s it going to cost?

How much will it cost?

A proposed committee substitute for House Bill 951, Modernize Energy Generation was introduced and discussed in the NC House last week. It’s a 47 page complicated, dense proposal to modernize NC’s energy generation and  make substantive changes to generation, ratemaking and investments in energy infrastructure. The plan was worked out over months of closed door stakeholder negotiations.  The John Locke Foundation was not included in those negotiations. We would have asked how much will the plan cost?

In sum, the bill requires the retirement of coal fired facilities, transitioning to more reliance on natural gas, nuclear and renewable energy sources. It allows multi-year rate plans and performance-based ratemaking, which claims to save ratepayers money. The transition will necessitate upgrades to the electrical grid system.  At least in the short run, all of this will cost money.

I’m a free market capitalist so the idea that a fair playing field incentivizes companies to expand into North Carolina, flourish, create jobs and make money is one I fully support. Public utilities, renewable energy producers, natural gas industry – all honest players are welcome.  When government gets involved and laws are enacted to interfere with the free market things get complicated, On the one hand public policies over the last decade of restrained government spending, lower taxes, fewer burdensome regulations and prioritizing the right investments have resulted in a healthy economy, more jobs and greater prosperity across NC.  On the other hand, when those successes come at the expense of taxpayers, it’s a red flag.

In the case of HB 951, (very similar in import and scope to 2007’s SB3, by the way) changes in the energy market directly impact customers and not just when they pay their electric bill at home.  They pay again as taxpayers when the state and local governments’ electric bills go up (think schools, agency, government buildings, etc). Then they pay again as consumers when costs go up and the cost of goods and services increase.  Business owners pay yet again as their resources are diverted from investments or job creation to paying higher electric costs.  Assessing the cost of energy is a key factor in economic growth decisions, for businesses small and large. So how much this modernization transition is going to cost is a question that must be answered.

Just as state budget writers started with determining how much they were going to spend before making line item appropriations, the lawmakers and stakeholders crafting comprehensive energy reforms should start with determining how much will their proposals cost and who is going to pay it. Without knowing the cost, elected officials are going to have a hard time explaining these changes to their constituents.

Part 1 of HB 951 finds “in order to ensure predictable and low customer electricity costs….it is in the public interest and the policy of the State that maintaining predictable and affordable customer electricity costs….seeks to ..lower the overall cost..reduce the risk of future rate shock…”. So keeping costs low is a stated priority but there’s no breakdown of what the modernization plan is going to cost and who’s going to pay for it.

There is nothing in the bill about who’s going to pay the deferred costs of environmental damage of expansive solar farms and cleaning up the waste of expired solar panels with the expansion of the use of solar power in the plan. There’s also the question of debt, costs associated with closing plants, pooling assets, repackaging those into securities. Who would pay the costs; who would  benefit?

All of this may be fine. Clearly we need to modernize the electric grid, technology and resources are changing.  Look no further than the recent Colonial pipeline hacking to see what a disruption in energy looks like.  And we should always look for the least cost, reliable energy source. I don’t have the expertise to access whether HB 951 does all of that. Nor do I believe the authors of the bill have ill-intent. But I haven’t heard anything that directly answers the question: what is this going to cost?.

Before the discussion on HB 951 goes any further, lawmakers need to request a Fiscal Note with a complete breakdown of the costs associated with the entire life of the plan. If they want public support for the plan, we need to know what it’s going to cost us. That should be the first step.

Becki Gray / Senior Vice President of Government Affairs and Outreach

Becki Gray is Senior Vice President of the John Locke Foundation. She provides information, consultation, and publications to elected officials, government staff and other dec...