Utilities put their stamp on efficiency

A state alternative-energy law is all but certain; Duke and Progress back caveats that protect their interests

For years, the state's powerful electric utilities blocked proposals that would require energy alternatives and efficiency, saying such programs would be too costly and wouldn't work.

Now, with state lawmakers poised to approve an energy-efficiency requirement this year, Progress Energy and Duke Energy have come around, backing environmental policies that many say are inevitable in an era of global warming and volatile energy costs.

State lawmakers will soon consider a proposal that would require the state to derive 10 percent of its electricity from energy-efficiency savings, as well as from solar, wind, waste or other renewable sources.

Long dismissed by utility officials as a pipe dream, the proposal stands its best chance of passing -- largely with the backing of the state's two Fortune 500 electric utilities.

But the utilities' support for conservation and renewables is conditional. A growing wish list is getting tacked onto the environmental proposal.

The measure is coalescing into a state energy policy that would make it easier for utilities to charge customers for expenses anticipated in years to come.

Manufacturing and industrial groups are getting into the act, asking to be exempted from a state sales tax on electricity and manufacturing fuels. The estimated cost to state and municipal coffers: $50 million a year.

Some environmental advocates worry that the corporate grab bag will undermine any green-energy policy, said Elizabeth Ouzts, state director of Environment North Carolina. If utilities have a greater ability to recover expenses, it might encourage the building of new coal-burning power and nuclear plants, they say.

"The point of having a clean energy standard is to move us away from dirty, dangerous sources of energy," Ouzts said.

Sen. Daniel Clodfelter, a Democrat who represents Mecklenburg County, counters that the utilities' proposals have been essential in transforming a piecemeal solution into a comprehensive energy package.

"I do not think they will derail the bill," said Clodfelter, a co-sponsor of the measure. "They'll give the bill broader appeal, but also a solid foundation for an overall energy package for the next 25 to 30 years."

About half the states in the country require efficiency and renewables to meet energy needs. The green power requirements were typically adopted as part of a sweeping policy change, usually utility deregulation.

If North Carolina adopts the requirement, it would be the first state in the Southeast to do so. As the policies take shape, one thing is clear: All utility customers would pay more for electricity. The cost increases will come from paying for efficiency programs and renewables, rising energy costs and new power plants.

The total cost won't be known until a compromise proposal is negotiated and then sent for debate to the Senate Committee on Agriculture, Environment and Natural Resources. The dollar figure will be calculated by the Public Staff, which is the consumer advocacy arm of the N.C. Utilities Commission.

And the proposal could stall or change as it winds through the legislative process.

Utility officials say they are pursuing several options -- including new power plants -- to prevent electricity shortages or price spikes.

"We have a legal obligation to meet the state's growing energy demand with reliable electricity," Progress Energy spokesman David McNeill said.

To smooth the proposal's prospects in the legislature, General Assembly staffers have held informal workshops to draft a compromise. Scores of lawyers, lobbyists and other advocates have packed a half-dozen workshops in the past two months. Such discussion and compromise are often part of the law-making process.

"Everyone who has an interest is at the table negotiating," Clodfelter said.

Duke Energy and Progress Energy are also seeking policy changes that would encourage Wall Street to finance major power plants.

Most significantly, the utilities want to make it easier to charge their customers for the multibillion-dollar cost of financing and building a nuclear power plant -- even if the plant is abandoned and never put into use. Under state law, utilities can't charge customers for new power plants until the facilities are generating electricity. The only exception is for financial distress.

The utilities also want to pass on operating expenses for environmental cleanup and compliance each year, meaning customers could start seeing the cost in their bills next year, instead of waiting for the occasional rate case.

North Carolina has some of the lowest electricity costs in the nation, and it has been slow to embrace renewables and efficiency. But global warming concerns are dramatically shifting public perceptions, as Progress Energy officials discovered this month in a public opinion survey.

For the first time, the company asked customers about their views on conservation, efficiency, renewables and climate change. Progress Energy's customers responded that the utility's priorities, in addition to affordable electricity, should be promoting energy efficiency and developing renewables.

"This legislative package is a reflection of the priorities our customers want," company spokesman McNeill said.