Dive Brief:

• North Carolina House Republicans are going back to the drawing board this week, following Democrat and other stakeholder opposition to a proposed comprehensive energy bill.

• House Democrats, along with Democratic Gov. Roy Cooper, oppose the bill for what they see as its high costs, weakened regulatory oversight and lack of ambition on clean energy and emissions reductions. Republicans had initially hoped it would be voted on in the House this week, but are now negotiating with Democrats on amendments before bringing it to the floor.

• The legislation is a high priority for Duke Energy, one of few stakeholders allowed in closed-door negotiations on the initial text. "The bill is very important to Duke," said Rep. Pricey Harrison, D, "They're doing what they can to get it passed."

Dive Insight:

Duke and a select group of stakeholders spent months negotiating the 48 page bill introduced in the House last week. But Democrats and others — including some groups involved in the closed- door negotiations — have made their concerns about the bill known, forcing Republicans to revisit portions of the bill if they want to see it pass in a bipartisan manner, and get signed by the Democratic governor.

Of principal concern to the renewables industry, manufacturing industry, environmental groups, Democratic legislators and the governor, are provisions in the bill that would dilute the authority of the North Carolina Utilities Commission (NCUC), which oversees utility rate hikes, long-term resource plans, unit retirements and more.

"The bill takes away long-standing utilities commission authorities — authorities that are in place to protect not just ratepayers, but also the utility, to balance the risks between those parties," said Preston Howard, president of the North Carolina Manufacturers Alliance.

Much of the regulatory changes revolve around how coal plants will be retired, replaced and financed. The bill prescribes in detail when coal units will be taken offline, what generation will replace those units, and mandates the commission hold a single public hearing on replacing that capacity. For example, in replacing the 2,422 MW Roxboro coal plant, the bill says replacement generation should be located on the same site as the retiring facility, be dispatchable, and have capacity near-equal to that of the retiring units.

The legislation is "basically saying gas plant without saying gas plant," said David Rogers, southeast deputy regional campaign director for Sierra Club's Beyond Coal campaign. And the commission is tied to approving that plant, even if that level of capacity isn't needed by the time the plant retires. "The goal should be a reliable system. And that may — or may not — mean replacing Roxboro, for example, on a one-for-one capacity basis," said Rogers.

Further, one section of the bill allows Duke to treat the remaining costs of its retired coal plant as a regulatory asset, meaning it can depreciate those costs over time without having to prove to state regulators that any costs sunk into that plant were reasonable and prudent, and should therefore be absorbed by ratepayers. Another section expedites the process for the utility to attain a certificate of public convenience and necessity, regulatory compliance that requires the utility to prove the worth of its infrastructure investments to the commission so that it can absorb those costs in its rate-base.

There are also concerns from manufacturers around the securitization portion of the bill: There is over $5 billion in book value remaining on the coal plants Duke would retire under this bill, according to Howard, but only $200 million of those costs will be recovered through securitization, which he and other ratepayer advocates say provides the best value for ratepayers.

"That's not even remotely close enough for our guys to get on board," said Howard.

Many of these concerns are echoed by some Democrats and the governor, who in a statement opposing the bill said the legislation "would cost ratepayers too much, fall short of clean energy goals, hamper job recruitment and weaken the Utilities Commission which exists to provide accountability for utility companies." 

"[I]t's clear they need to go back to the drawing board and negotiate with a broader spectrum of stakeholders in order to get a better plan," he added.

Democrats met with Republicans Monday afternoon to negotiate further, said Harrison.

Duke said its initial negotiations with the renewables industry, industrial consumer groups and Republicans was just the "first step" of the legislative process.

"As we help chart our state's transition away from coal, we look forward to continuing our work with stakeholders, policymakers and Governor Cooper as policy changes evolve," said utility spokesperson Grace Rountree in an email. "We hope everyone can agree that the time is now to accelerate efforts to transition away from coal, protect North Carolinians from price spikes and ensure continued affordability and reliability all of us depend on."