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Wednesday, 08 August 2007 00:00

Energy bill weak, but a good start

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There are serious problems with the energy legislation passed this session in the North Carolina General Assembly, but the bill also marks a watershed moment for North Carolina and the Southeast — this state is now the first in the region to mandate that a percentage of its electricity needs be met with clean energy sources.

By 2021, at least 12.5 percent of the electricity sold by the utility companies will have to come from renewable sources or conservation programs. Municipal power providers and electric co-operatives will have until 2018 to meet a 10 percent standard.

Those targets should have been set higher, but even opponents should recognize the significance of this legislation. Ten years ago a bill that mandated renewable energy production of any kind would have been lucky to win the support of a small handful of legislators. Over the past few years, though, the negative effects of climate change, the need for independence from foreign oil, and the health- and environmental-related damage from energy production have all been accepted as real problems that must be dealt with.

By legislating at least a percentage of power production from green sources, we could see unprecedented investment in solar and wind energy, along with biofuel production and the conversion of other waste sources into energy. That is the belief of the few environmental groups who supported this bill. This may be a baby step, but it is a step in the right direction.

The main problem with this legislation is that it, in many ways, sends a mixed message. While encouraging the production of renewable energy, it also encourages the building of new coal and nuclear power plants. Environmental and consumer groups were outraged that utility companies will now be able to charge customers for the cost of new power plants before those facilities are built. This would provide these companies with the ability to borrow the money for construction from otherwise reluctant Wall Street investors. The customers paying the higher rate provide the utilities with a guaranteed source of revenue to pay off the financing costs, making construction more attractive to potential investors.

“Giving utilities cheap money, cheap financing, on the backs of ratepayers doesn’t guarantee customers will have lower rates in the end. To the contrary, it encourages the utilities to aggressively invest in plant construction,” Shana Becker, a lawyer with the N.C. Public Interest Research Group, told a newspaper during hearings on the bill.

She’s absolutely correct. This new method for financing power plant production actually stymies the free market system. If deep-pocketed investors are reluctant to loan money for nuclear plants or coal plants, then those plants become more expensive. This would give utility companies an incentive to encourage conservation or develop new renewable sources. Now that this legislation has passed, the utility companies will have an easy method to finance new plants instead of encouraging conservation.

Over the next 25 years North Carolina’s population is expected to grow from nearly 9 million residents to 12 million. It’s difficult to imagine meeting the electricity needs of these residents without increasing power production. If that’s the case, then the only way to offset the negative effects of more power production is to increase renewable energy sources. This bill is flawed, but its mandate for renewable and green energy production from the state’s utilities is a positive move.

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