The Pulse

A testy Senate passes controversial ratemaking bill that would favor Duke Energy

By: - May 3, 2019 10:01 am
Coincidence? Found on a table this week at the General Assembly (Photo: Lisa Sorg)

The name “Duke Energy” is so contentious that Sen. Dan Blue asked his fellow lawmakers to forget it. At least for the purposes of passing a bill that would be a ratemaking coup for the nation’s largest utility.

“Move away from the name,” said Blue, a Democrat and one of the primary bill sponsors, on the Senate floor Thursday, “and bring in 21st century practices.”

These practices, enshrined in Senate Bill 559, would allow Duke to petition the utilities commission for a multi-year rate plan, instead of having to request a rate hike hearing more often. “This is very simple enabling legislation,” said Sen. Paul Newton, a former Duke Energy executive. “It simply allows the utilities commission to consider alternative ratemaking.”

But whenever a lawmaker advises that a bill is “simple,” it’s usually not. While the utilities commission could ostensibly deny Duke’s request, it’s unclear if it would. And because of an amendment by Sen. Ralph Hise, Duke could ignore the utilities commission’s rulings on rate cases. If Duke doesn’t get the increase it wants, it could simply withdraw its proposal and try for a do-over later. This would wastes hundreds of hours and thousands of dollars spent by utility commissioners and the public staff, which advocates for the ratepayer, on preparing for the rate case.

The public could have fewer opportunities to formally comment, since rate cases could be held less often.

Bill proponents claim that rates would decrease under the new mechanism, and that the angst against the measure is misplaced.

“No bill has had more hyperbole,” said Hise, himself using hyperbole to describe hyperbole.

But the broad strokes of the bill language leave it open to interpretation. Nor is there proof of supporters’ claims. as Democratic Sen. Mike Woodard noted during the floor debate, “Where is the evidence?”

Newton said a US Department of Energy study showed these mechanisms “can slow the growth in customer bills.” However, that is speculative. And he acknowledged that a utility’s rate of return — the monies distributed to shareholders — “could go up and down” within the multiyear rate plan.

It’s not coincidental, Woodward went on, that the bill was introduced as the utility faces enormous costs: $13 billion for grid modernization and $10 billion for coal ash cleanup. The utility reported $24.5 billion in gross revenue last year; “modernizing” the ratemaking scheme could help prop up those earnings. (Duke is scheduled to release its first-quarter financials on May 9.)

Blue said that telephone companies have operated under alternative ratemaking plans for many years. However, unlike Duke, which has a regulated monopoly, telephone companies have competition. Customers can choose their carrier.

North Carolina’s business community overwhelmingly opposes the bill, because of the likelihood of multi-year rate increases.

Sen. Bob Steinberg, a Republican who voted against the bill, mentioned a letter sent from the NC Manufacturing Association, and signed by 59 companies, opposing it. “There’s only one company asking for this,” he said. “Are we supposed to ignore 59 companies? It’s a strange way to go about business even in this body politic.”

“Put on your consumer hat before you vote,” Woodard urged his colleagues. “It’s a radical change. Where is the evidence of these claims? Of efficiency and lower rates? Do you understand the rate plan enough to be comfortable with it, to explain it to your constituents?”

Regardless of their depth of understanding, the Senate passed the bill 27-21. Six Republicans voted against the bill; five Democrats voted for it. Sen. Floyd McKissick recused himself because he was recently appointed to the utilities commission by Gov. Roy Cooper.

It now goes to the House.

Behind the scenes, bill sponsors and Duke lobbyists spent the week trying to rustle up support. The first section of the measure is not controversial. It deals with cost recovery and bonds to help utilities pay for repairs from storm damage. But the ratemaking provisions jeopardized the bill’s passage. On Tuesday, it appeared Sen. Rabon was short two votes, which raised the possibility that the bill could be divided. The controversial rate section would have to live or die on its own.

But by Thursday, bill sponsors had scuttled the idea. The Senate further foreclosed on the possibility of dividing the bill when it kiboshed a motion to do so, introduced by Democratic Sen. Harper Peterson.

Woodard tried to slow the bill’s roll, and called for a study of alternative rate-making, a process that would include concerned parties. That proposal also failed.

The final Senate vote capped a speed-of-light legislative process that began in earnest just two weeks ago. In a committee meeting on April 18, bill sponsors and Duke Energy unleashed a full-court press to convince lawmakers that the measure was a mere trifle. Alex Glenn, Duke Energy’s senior vice president of State and Federal Regulatory Legal Support, told the committee that multiyear rate schemes are “nothing new. It’s permissive. It’s a measured step forward.”

“This bill will reduce the rates we pay,” said Hise. “When we recruit businesses they’ll know what to expect over a three-to-five-year plan.”

That’s precisely the problem, said the AARP, the NC Retail Merchants Association and Appalachian Voices, all of whom opposed the bill. There’s no guarantee that rates will decrease, and if they rise, customers could be locked into higher bills for several years.

“Good policy isn’t developed under a cloud of secrecy or rushed through,” said Matt Lawson of Appalachian Voices in the committee hearing. The new rate scheme “was grafted on to unrelated legislation about storm recovery.”

Peterson asked, “What’s driving this? I see no reason for the dramatic change.”

“Maybe you’re scared of the dark? Metaphorically speaking,” Rabon replied. “If you’re scared of new options, maybe you’re scared of the dark.”

“I am afraid of the dark,” Peterson retorted. “The dark star: a $13 billion grid upgrade, a $10 billion coal ash clean up put on the back of the customer. I’m concerned about the voice of the consumer.”

Below: A list of the bill sponsors, the amount of campaign contributions received from Duke Energy last year, and how they voted on SB 559.

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Lisa Sorg
Lisa Sorg

Assistant Editor and Environmental Reporter Lisa Sorg helps manage newsroom operations while covering the environment, climate change, agriculture and energy.