By Shana Becker
Before buying our first house and locking into a 30-year mortgage, my husband and I consulted every expert we could think of – real estate agents, appraisers, inspectors, surveyors, mortgage dealers and lawyers. We are first-time homebuyers, and if all goes well, we will close on our house in two weeks.
While financing a house involves a lot of money, it is a cup of water compared to the ocean of costs for nuclear and coal construction. Yet, a well-settled law on utilities’ financing faces total revision without the benefit of research, the scrutiny of experts or factual basis. If the state Senate’s “Promote Renewable Energy/Baseload Generation†bill passes in the House, consumers could be forced to sign a blank check for financing nuclear and coal “construction works in progress†(CWIP).
For over 20 years, the General Assembly has rejected utilities’ lobbying for CWIP. By design, CWIP raises rates and shifts risk to customers. This session, however, CWIP sailed through the Senate on the coat tails of renewable energy and efficiency.
The renewable energy and efficiency part of the “Promote Renewable Energy/Baseload Generation†bill encapsulates years of research and scrutiny. It takes a pragmatic approach to diversifying North Carolina’s energy platform and it includes consumer protections.
According to a 135-page technical report prepared for the Utilities Commission, North Carolina can cheaply achieve a 14 percent efficiency standard and realistically implement a 7.5 percent renewable energy requirement. The Senate’s bill adopts a conservative 5 percent efficiency standard and a 7.5 percent renewable energy requirement for public utilities. It also includes a series of cost caps to protect consumers.
Economically, research indicates that this legislation will generate at least 2,700 jobs and long-term savings of at least $577 million more than the utilities standard portfolio. It will also reduce North Carolina’s dependence on imported fossil fuels, which cost customers $1.6 billion per year. Environmentally, it will reduce our carbon footprint and it will not contribute to radioactive waste.
There are no studies, however, to establish the pragmatism of CWIP. There are no fiscal notes and no data to suggest it is a good idea. If research on CWIP existed, however, it would probably consider the history of nuclear and coal construction in North Carolina.
Take, for example, the Shearon Harris Nuclear Plant. Progress Energy (then CP&L) originally projected a need for four new reactors that would cost $1.1 billion. Cost overruns, projection errors and delays resulted in the completion of one $3.9 billion nuclear reactor. Customers were forced to pay that bill. Regarding coal, Duke Energy’s Cliffside project could be informative. Although construction has not begun, cost estimates have increased by almost $1 billion.
Given the history of nuclear and coal construction costs in North Carolina, there should be a reason for shifting more risk and expense to customers. The utilities have promised that CWIP will lower costs by providing stockholder assurances and making financing cheaper.
But the utilities also said that Shearon Harris would generate energy “too cheap to meter.†The utilities’ “trust me†is not good enough.
Apart from administrative review, the CWIP provision includes no consumer protections for cost overruns and construction delays either — no cost caps or refunds. Utilities can repeatedly revise their costs upwards and customers would have to sign a blank check.
I have more research about the financing for my first house than there is about changing financing for CWIP. My housing contract also gives me more certainty and protection from ballooning costs than the law gives ratepayers for CWIP.
CWIP’s attachment to the renewable energy and efficiency bill has kept it alive.
Reversing the CWIP financing law without basis and failing to include consumer protections makes no sense. While the renewable energy and efficiency standard is economically smart and environmentally necessary, the utilities’ ransom – a blank check for CWIP — is unacceptable.
Shana Becker is a staff attorney with the N.C. Public Interest Research Group (NC PIRG)Â