RALEIGH, N.C. — After a cold snap sent energy bills soaring in many North Carolina households, the public has a chance to weigh in on Duke Energy’s long-term generation plans. At the center of the debate is the utility’s reliance on natural gas and who should bear the risk when prices spike.
The utility’s Carolinas Integrated Resource Plan or the Carbon Plan, lays out how Duke Energy aims to meet the state’s energy demand, keep power reliable and move towards the state’s net zero goals by 2050.
As the North Carolina Utilities Commission weighs the plan, the public can voice their concerns at a series of hearings across the state.
At Monday’s virtual hearing, most criticisms focused on the high cost of power and concern it will only get worse as the Carbon Plan relies heavily on new natural gas power plants in the near term.
Matthew Mayers of Winston Salem expressed concern that the rising costs of fuel would mean higher bills and more price shocks if Duke Energy moves forward with such a large gas buildout.
“We’ve all seen the direction that natural gas prices are going,” he said. “We’ve seen how gas turbines themselves are going up in price, because it turns out solar panels, batteries and are all going in the opposite direction, and promise to continue to do so for a long time. So why are we not following that least cost pathway?”
Under North Carolina law, Duke Energy passes the cost of fuel to generate electricity entirely onto customers. This is called the fuel rider.
Critics like Joshua Brooks with the North Carolina Sustainable Energy Association say this policy made sense under the older coal-based electric system where fuel costs were more stable and predictable. Now with fuel costs based primarily on natural gas, he worries the fuel rider insulates utility companies like Duke from the financial consequences of relying on a more volatile commodity.
“It’s much more of a dynamic market where you have producers contributing gas to the supply lines on a minute-to-minute basis. You have wholesale purchasers of that gas who are using it, and then, in some cases, repackaging it and selling it again,” he said. “[Duke Energy] is freed from the concern about what that actual cost is, and they just fix it into their rates, and that cost is absorbed 100% by the rate paying class.”
A recent study from the Rocky Mountain Institute analyzed how shifting that fuel-rider policy to a “cost-sharing” mechanism could save North Carolina customers millions. The study looked at a policy, designed after similar policies in other states, in which customers paid 90% of fuel costs and Duke absorbed 10% with a .5% cap of the previous year’s retail revenue. That meant if costs were higher than forecasted, Duke would pay 10% of the overrun and pass the rest onto customers, but if costs were lower than forecasted, the utility could keep 10% of the savings.
The study found between 2020 and 2024, a policy like this could have saved Duke Energy customers nearly $89 million. It also argued such a mechanism could lead to more customer savings as it would incentivize utilities to choose generation strategies that reduce fuel costs.
Duke Energy spokesman Bill Norton wouldn’t speak to the study or the cost-sharing policy, but reiterated fuel costs are included in modeling for the Carbon Plan and that, under the current fuel rider policy, customers benefit when fuel costs decrease.
“Customer rates have frequently gone down in response to fuel costs,” Norton said. “The most recent related fuel related decrease of 6.2% for customers occurred just over a year ago. So we really feel it’s important that customers benefit from these rate reductions as well as increases when they occur. They paid no more and no less than what we have to pay.”
He also argued that the Carbon Plan as is includes a significant amount of battery storage build out that will help reduce the need for gas use when energy demand is at its highest. Still, he said a large gas buildout is needed to keep power reliable, especially during cold snaps.
“Natural gas is critical,” he said. “If you look at what we saw in late January and early February, we’ve got nearly five gigawatts of solar on the grid, but it was only producing about 5% of its capacity during that cold snap.”
As for affordability, the current Carbon Plan predicts it will require an average 2.1% rate increase over the next 10 years. That’s only one piece or what customers might see in upcoming rate cases though.
Additional rate increases like the proposed 18.5% rate increase for Duke Progress customers and the 15.8% increase for Duke Carolinas customers over the next two years includes additional costs like grid, reliability upgrades.
“Think about the steel poles along the Swannanoa River that survive hurricane Helene,” he said. “That would be separate than talking about the resource plan itself.”
The Carbon Plan hearings continue Tuesday and Wednesday. Hearings on proposed rate increases over the next two years will take place in late March/early April for Duke Energy Progress customers and late April/early May for Duke Energy Carolinas customers.
Ultimately the NCUC will have final approval of the Carbon Plan and all potential rate increases.
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