According to an article recently printed in Raleigh’s The News & Observer, Progress Energy company executives stated it is unlikely the utility will meet state targets for producing clean electricity.  The utility reviewed more than 100 proposals to generate electricity from renewable resources such as solar, wind power and agricultural waste. The costs proposed so far are four times as high as Progress Energy had expected.  The company will use all of the money it is allowed to spend, reaching the cost caps included in the 2007 state law that requires more of North Carolina’s electricity to come from renewables.

State lawmakers included the cost cap because renewables typically are more expensive than conventional power plants.  The extra costs would be passed to customers in their monthly bills. The state law limits the utility to spending $1.5 billion on renewable resources by 2021, the year the state’s clean energy requirement is fully phased in. That’s when both Progress Energy and Duke Energy will have to receive 7.5 percent of its electricity from renewables and 5 percent from energy efficiency programs. Currently, less than 2 percent comes from the alternative resources.

“We actually doubt we can get 7.5 percent within the price cap,” Progress Energy CEO Bill Johnson said. “You’ll get to the price cap in a couple of years.”

In the past six months, Progress has signed contracts to buy electricity from three solar farms, as well as from power plants fueled by landfill methane gas and by wood chips. The company will meet its first deadline, requiring solar energy, next year. But as stricter requirements phase in over time for more electricity generated from the sun, from chicken droppings and from swine waste, the availability dwindles and costs increase, Progress executives said. State regulators agree. The costs of renewable proposals submitted to Progress and Duke were reviewed by the Public Staff, the state’s consumer advocacy agency.

“We can certainly see why they’re coming to that conclusion,” said James McLawhorn, director of the Public Staff’s electricity division. “Unless something changes, we probably are not going to reach the state-mandated levels.”  Customers will pay even more if Congress passes federal renewable mandates that are stricter than North Carolina’s, which are being debated now, Johnson said.  Progress would have to pay penalties for noncompliance, passing those costs on to customers. The company estimates that bills in Congress could cost Progress Energy’s residential customers as much as $6 a month, much of it in penalties.  Environmentalists have long contended that utility companies in this state overestimate the cost and downplay the availability of renewable resources.

Progress executives state there is a better way to cut greenhouse gases: build new nuclear plants. Johnson says new nuclear plants, which do not burn fossil fuels to generate electricity, will do more to advance the nation’s goal of reducing greenhouse gases than renewables.  Progress is applying for federal licenses to build two reactors in Florida and two reactors at its Shearon Harris nuclear plant in Wake County.

The state does not limit how much a utility is allowed to spend on nuclear plants as long as the costs are demonstrated to be reasonable and prudent. The price of the two Florida nuclear plants and associated transmission lines is estimated at $17 billion, which will add as much as $25 a month to residential bills in Florida when phased in.

The cost caps for renewables is much less than expected nuclear costs, but renewables would generate a fraction of the power. Residential customers would pay no more than $10 a year from 2008 to 2011, $12 a year to 2014 and $34 a year thereafter. The cap for commercial customers starts at $50 a year and tops out at $150 a year. The cap for industrial customers starts at $500 a year and peaks at $1,000 a year.

Johnson said biomass — agricultural waste, wood chips and animal droppings — is the state’s biggest renewable fuel resource, but the price is still too high. “If renewables were easy, effective and plentiful, we’d be doing them,” he said. French Broad EMC is an all-requirements wholesale customer of Progress Energy and is also an electric utility required to meet the state mandate for renewable energy.  FBEMC is facing the same challenges Progress Energy is facing.  Every North Carolina utility will be adding the costs of meeting the renewable laws to their customer’s bills.  It will be noted on each customer’s bill as a “renewable energy portfolio charge” (REPS).  In the near future, there is likely to be federal laws for both climate change and a national renewable requirement that will add to these costs.  Analysts estimate as much as a 40% increase in a consumer’s monthly bill if current proposed legislation becomes law. 

Thank You,

Jeff Loven
Email: jeff.loven@frenchbroademc.com


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