NCSEA, Environmental Groups Reach Rate Case Settlement with Duke Energy Carolinas

NCSEA's mission is to drive policy and market development that creates clean energy jobs, economic opportunities, and affordable energy for the benefit of all North Carolinians. In support of our mission, throughout the spring NCSEA has been deeply engaged in the Duke Energy Carolinas ("DEC") and the recent Duke Energy Progress (“DEP”) rate cases.

In both the DEC and the recent DEP rate cases, NCSEA advocated for essential policies such as fair rate design, transparent and collaborative grid planning, giving customers easy access to their energy usage data, and true grid modernization.

We advocated for these policies because they were directly relevant to the rate case proceedings, and these policies advance NCSEA’s belief that sourcing more of our energy needs from clean energy resources located in North Carolina and enabling customers to utilize a truly modern grid and non-wires alternatives is necessary for all electricity to be affordable, accessible, and reliable in the future. For NCSEA, "clean energy" encompasses affordable and systemic access to, and use of, renewable energy, energy saving solutions, transportation electrification, an intelligent grid, portfolio power plants, and energy storage.

DEC's initial proposal in its rate case would have been an unnecessary and expensive setback for ensuring affordable and accessible electricity that benefits all North Carolina, clean or otherwise. Their proposal would significantly increase fixed charges on customer bills, charge customers for coal ash clean-up, and invest heavily in Duke's Power/Forward initiative, including a $7.8 billion investment over 10 years on a combination of both grid modernization activities and typical operations and maintenance, such as tree trimming and burying power lines. As proposed, DEC's Power/Forward investments would do little to ensure electricity service includes affordable, accessible clean energy options for all customers.

The $7.8 billion price tag for Duke’s Power/Forward initiative is a part of Duke Energy’s much larger ten-year capital expenditure plan. Their total spending plan will presumably raise customers rates and bills far more than it will save them, with little focus on enabling Duke itself and their customers to realize future energy and cost savings. The Power/Forward Initiative as proposed would itself raise residential electricity rates about 50% over ten years, and the total rate impact of Duke’s plans would presumably be much higher, if and when that spending occurs.

NCSEA has consistently heard two major concerns from a great diversity of stakeholders: the massive cumulative rate increase for ratepayers caused by the capital expenditure plan, and the basic necessity of many of Duke’s plans, such as Duke’s Power/Forward initiative.

NCSEA agrees some grid modernization is necessary, but given the price tag of Duke's proposal and the continuing decline in clean energy costs, how North Carolina modernizes its grid matters more now than ever for consumers. DEC's proposal has laid bare the reality that the interests of Duke and energy consumers have become misaligned in fundamental ways, and experience suggests that the misalignment cannot be resolved under current laws and regulations. Nonetheless, NCSEA is committed to aligning the interests of North Carolina's regulated utilities, customers, and innovative clean energy providers around an energy system, policy framework, and economy that benefit all North Carolinians.

Given the ongoing absence of a larger opportunity for transparent and inclusive collaboration, NCSEA engaged in the DEP and DEC rate cases to advance these goals of alignment around affordable, accessible clean energy system, policy and economy that benefits all North Carolinians.

On June 1, 2018, NCSEA reached a partial settlement agreement with DEC, along with the Environmental Defense Fund and the Sierra Club. The decision to negotiate and enter into this settlement was complex and challenging. NCSEA received input from what was a feasible cross-section of experts, partners, and members, within the short time available, to arrive upon these negotiated terms as approved by our Board of Directors.

What is and isn't in this Settlement

During the DEC rate case, NCSEA advocated for a grid modernization process that would: 1) prioritize intelligent and efficient planning, 2) comprehensively include distributed energy resources in the planning process, and 3) evaluate non-wires alternatives to traditional investments.

This agreement results in a comprehensive planning process, including integrated distribution planning, with annual review by the Utilities Commission. The agreement prioritizes true grid modernization activities, instead of traditional operations and maintenance activities; significantly reduces the financial impact on customers from DEC's initial proposal; and includes several important steps for clean energy in the areas of EV infrastructure, energy storage, and distributed energy planning. NCSEA is also agreeing to enter into a similar agreement with the same benefits in Duke Energy Progress’ next rate case, expected in 2019.

This settlement reduces DEC's investment from a staggering $7.8 billion over 10 years to $2.5 billion over 3 years while investing in grid modernization and taking procedural steps to advance North Carolina's energy economy along a cleaner, more affordable, and transparent path. Specifically, the settlement will:

• By January 1, 2022, institute integrated distribution resource planning, and a process where NCSEA and other parties will provide input and feedback to DEC about what goes into the development and use of their new Integrated System Operation Planning, such as: parameters, use of distributed energy resources (“DER”) and non-wires alternatives, forecasts, assumptions, and other inputs.
• Avoid running expensive fossil fuel peaking power plants during periods of high electricity demand, by installing voltage optimization equipment on 20 percent of DEC’s circuits by 2021. Basically, DEC will be able to adjust voltage as needed without impacting power quality for customers on the grid. DEC will also provide relief from the Line Voltage Regulator (“LVR”) engineering screen that has been slowing or preventing distributed renewable energy systems from interconnecting with the electricity grid.
• Deploy $25 million for electric vehicle charging infrastructure, including rebates for residential customers who install chargers capable of providing demand response services, charging for low-income communities, transit and school bus electrification, and public charging EV charging.
• Deploy 200 MW of energy storage by May 2023, followed by an additional 100 MW of energy storage by May 2026. While DEP has outlined as much as 75 MW of new energy storage related to its Western Modernization Project in Asheville, this settlement is the first time that DEC has committed to significant energy storage deployment in its service territory.
• Empower customers to make better-informed decisions about energy consumption and, as a result, increase opportunities for customers to reduce their usage and use energy more efficiently. DEC commits that they will finally make customers’ energy use data available to customers through “Green Button,” which is a platform that provides customers with easy and secure access to their energy usage information. Green Button Download My Data will be implemented in 2019, and upgraded to Green Button Connect My Data thereafter. This is something that NCSEA has been advocating for years for in our policy work.

Because this is a partial settlement, it does not address everything that NCSEA advocated for in the rate case. Specifically, the partial settlement does not address the residential base customer charge or the methodology used for its calculation, advanced rate designs, or other issues for which we advocated.

On the whole, this settlement represents great opportunities to continue advancing North Carolina's clean energy economy. It will:

• Better ensure long-term grid modernization efforts are both affordable and clean. In DEC's original Power/Forward proposal, less than 50 percent of the investment was for true grid modernization. The settlement requires approximately 90 percent of the now-reduced spend be dedicated to grid modernization.
• Reduce short- and long-term customer bill impacts. Under the settlement, DEC will be able to recover some of its investments through a pilot grid rider for a period of three years. The reduced spend will increase rates by an average of no more than 4.5% on average, or about 6% for residential customers over the three-year rider period. While this is an increase in rates, it is significantly lower than the 50% increase that was calculated based on DEC's original Power/Forward proposal.
• Establish administrative review and stakeholder meetings. The Commission will hold annual proceedings to review DEC's grid rider, and DEC will hold regular stakeholder meetings with the settling parties, including NCSEA. We are optimistic these meetings will foster greater collaboration which will result in more innovative and productive opportunities to sustainably manage energy consumption and reduce customer bills.

For media inquiries, please contact Diane Cherry at dianecherry@energync.org.

View our press release on the announcement here.