NCSEA’s Regulatory Team Argues for Higher Avoided Cost Rates for QFs

NCSEA works daily to help make tomorrow’s utility a reality today. Our regulatory team puts this mission into practice at the NC Utilities Commission, where the team regularly presents persuasive evidence and high-caliber written arguments that affect sustainable energy policy action.

The team’s June 22 avoided cost comments, which ask the NCUC to reconsider the rates Duke Energy Carolinas, Duke Energy Progress and Dominion North Carolina Power proposed in March, represent one of the team’s deepest dives to date into avoided cost rates.

What is an avoided cost and what is an avoided cost rate? When developers build qualifying facilities (“QFs”), like solar farms and biomass plants, they enable utilities to avoid the costs of building and operating a utility-owned power plant. Under federal law, these avoided costs determine how much QFs should be paid for the electricity they sell into the North Carolina grid. When avoided cost rates are set correctly, the amount the utility pays for renewable power purchased from QFs does not increase customers’ bills at all because the money paid to QFs would have been spent anyway on conventional power. Avoided cost rates play a key role in the continued development of North Carolina’s renewable energy industry. Like tax credits and North Carolina’s Renewable Energy and Energy Efficiency Portfolio Standard (REPS), fair avoided cost policy allows renewable energy to penetrate North Carolina’s otherwise highly regulated, limited energy market. The NC Utilities Commission reviews the utilities’ suggested changes to the rates every two years.

The regulatory team’s deep analysis of the utilities’ proposed rates resulted in the filing of 80+ pages of initial comments asking for rates to be set higher and for fair power purchase contract terms. Several industry players have indicated that NCSEA’s comments are helping set a new bar for avoided cost engagement both in and outside of our state. NCSEA, which brought in a consulting economist and an extended legal team for the analysis, certainly understands their importance: put simply, these rates directly impact how much renewable energy project developers get paid for the electricity they sell to the utilities. And when those rates aren’t fair, the businesses and their projects (and the associated economic development) will go elsewhere.

The utilities and the Public Staff will reply to NCSEA’s initial comments in filings to be made by July 27.

North Carolina’s avoided cost policy has been instrumental in making our state a national leader in clean energy development. By advocating for fair avoided cost rates, NCSEA’s regulatory team is working to ensure that progress continues for the clean energy businesses and employees that are driving the state’s $4.8 billion clean energy industry.