APRIL 27, 2001

By a vote of 43-5, the Senate on Monday passed and sent to the House legislation mandating sharp reductions of emissions from 14 coal-fired power plants in North Carolina and allowing the utilities to pass along the cost to their customers. A bipartisan majority supported passage of the measure, but the two Democrats and three Republicans who voted against it said they feared the financial impact it would have on business and industry and government agencies such as schools.

S. 1078 Improve Air Quality/Electric Utilities by Sen. Steve Metcalf (D-Buncombe) (left) would force Carolina Power & Light Co. and Duke Power Co. to cut emissions of nitrogen oxide from the power plants by 78 percent by 2009 and cut emissions of sulfur dioxide by 73 percent by 2013. Supporters of the measure say such steps are necessary to protect the public health and to shore up the state’s critical travel and tourism industry, particularly in the western part of the state where atmospheric haze is becoming an issue.

However, some are beginning to worry that the high cost of meeting the legislation’s mandates. The utilities estimate they would have to spend $2.2 billion on pollution-control equipment and would have to pass along that cost to their customers.

Based on information previously provided by Duke and CP&L, the impact of the legislation on a customer's bill would vary depending on the consumer's rate schedule and usage patterns. The increase (based on average preliminary estimates over a 12-year period and reflecting levelized costs) will be between $2.50 to $3.50 per megawatt hour. An example of the impact for an industrial customer with a monthly electric usage of 5,000 megawatt hours would be a monthly increase of $15,000. A customer with a monthly electric usage of 1,000 megawatt hours would experience a $3,000 increase per month.

Sen. David Hoyle (D-Gaston), one of the five to vote against the bill on second-reading (the bill was passed by a voice vote on third reading), said it would be “the last nail we drive in the coffin” of the textile industry. Others voting against the bill on second reading were Sens. Walter Dalton (D-Rutherford), Jim Forrester (R-Gaston), Robert Rucho (R-Mecklenburg) and Hugh Webster (R-Alamance).

NCCBI does not have a position for or against the legislation at this time. The association is encouraging the General Assembly to give the bill a more thorough review so all concerned can realize the fill impact and all the implications of passage before final action is take.

At the end of last week, final action on the bill in the Senate was delayed until the Legislative Research Commission staff could put together a fiscal note. The research indicated that the state’s power bill would go up about $5 million a year if the legislation becomes law.

The proposed bill would also:

Direct the Environmental Management Commission (EMC) to develop and adopt standards and plans to implement programs to achieve the collective reductions in the timeframe established.

Direct the Utilities Commission to allow each electric utility to recover the full costs of compliance with this bill.

Direct the State to use its resources to compel other states and entities to make similar reductions, particularly those states whose emissions adversely impact air quality in North Carolina or whose failure to make similar reductions would put the economy of North Carolina at a competitive disadvantage.

Direct the EMC to evaluate the need for further reductions of NOx and sulfur dioxide (SO2), and report its findings to the General Assembly and the Environmental Review Commission annually beginning September 1, 2004. 

Direct the Division of Air Quality to study issues related to the monitoring and control of mercury emissions from coal- fired generating units.

Direct the Division of Air Quality to study issues related to setting standards for carbon dioxide emissions from coal- fired generating units and other stationary sources of air pollution. (Source: Bill Analysis, Research Division)

The fiscal note on the bill says that, based on preliminary information from Carolina Power and Light (CP&L) and Duke Power, it appears that the fiscal impact on State Government as a result of higher electricity costs would be an average of approximately $5 million per year for the period from about 2002 through 2013, with some years higher than that and others lower. The start date and actual pattern of expenditures cannot be determined at this time.

The fiscal note further states:

The total impact on local government is not known, but examples of approximate impacts are given below for Charlotte, Durham, and Winston-Salem and their associated counties and school districts. The impact on state and local government results from Section 3 of the bill, which creates a mechanism for recovery of costs incurred by CP&L and Duke Power. The costs are to be recovered from customers, and as major utility customers, state and local government would be impacted. Information on which to estimate the size and timing of the fiscal impact is preliminary.

According to Duke and CP&L the likely impact would be approximately .3 cents per kilowatt-hour. Large government customers pay approximately 6 cents per kilowatt-hour (depending on which utility serves them and their electricity usage patterns). An additional .3 cents on a current rate of 6 cents is a 5 percent increase, and that is the impact assumed here. The actual amount will be determined by the Utilities Commission on the basis of criteria established in Section 3 of the bill.

According to the Office of State Controller, the state paid approximately $108 million for electricity in FY1999-2000. Not all of this would have been paid to Duke and CP&L, however. State facilities located in Fayetteville or High Point or other cities with municipal power systems would presumably pay those cities and would not be impacted by the bill. The same would apply for state facilities served by Electric Membership Corporations. The total of these deductions is not known, but it is assumed here that the State is paying Duke and CP&L, in total, about $100 million per year and that this would increase by about 5 percent, or $5 million per year as a result of the bill.

The fiscal note says information on the total impact on local governments is not available. As an example, however, Duke Power was able to provide data on the electricity bills of several large local government entities in Duke’s service territory, from which the potential fiscal impact can be estimated, as shown below.

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