Restructuring in North Carolina

Electric Restructuring

In North Carolina

Introduction: In North Carolina, although Electric Restructuring is just now being considered, many early innovations into rate setting were implemented through the regulatory process in this decade that have allowed the industry to evolve toward its present, more flexible form of regulation and customer service. Cost of service regulation remains the primary method of setting rates in the monopoly electric industry, although significant advances in wholesale procurement of competitive generation has become more commonplace in past years resulting in lower rates for all citizens in most cases. Below are some of the more important developments in electric industry restructuring over the past five or so years.

E-100, Sub 73 - Investigation into Innovative Rates: This Docket was initiated pursuant to a request by the Public Staff based upon pending rate activity in the state and reviewed the circumstance surrounding self-generation and industrial economic development. This effort was essentially the initial departure from standard electric industry regulation in North Carolina. The first request for a reduced electric rate was made by duPont in February of 1993. The Public Staff reviewed the application which provided a framework to support a lower electric rate in lieu of self generation and loss of nearly all of the industrial giants load. As a result of this proceeding and the duPont request, the Public Staff recommended, and the Commission approved, Guidelines and Filing Requirements for self-generation deferral rates as well as economic incentive rates.At present, the Commission has approved four self-generation deferral rates: duPont in E-2, Sub 656, Allied Signal in E-2, Sub 660, General Electric in E-2, Sub 703, Weyerhauser in E-22, Sub 350, and General Electric in E-2, Sub 702. Additionally, the Commission has approved economic development rates for both Carolina Power & Light and Duke Energy.

By motion dated May 5, 1995, the Public Staff requested the Commission to consider the third phase of the Sub 73 proceeding, Distributed Energy Facilities (DEFs) -- a involving dispersed facilities comprised of a combination of either electric or other energy services. In response to the Public Staff's motion, CP&L, Duke and Vepco filed a joint motion stating that the issues surrounding a DEF would be best considered after an actual application was presented to the Commission. By Commission Order dated August 9. 1995, the docket was held in abeyance until a specific DEF proposal is presented to the Commission for consideration.

E-100, Sub 77- Investigation into Retail Electric Competition: This Docket was the Commission's very first look at retail competition in electric generation. The proceeding was opened in response to a petition filed by Carolina Utility Customer's Association (CUCA) on February 8, 1995. Several parties intervened and responded to the two rounds of comments the Commission established to review the complex issues of restructuring. The Public Staff advocated an aggressive stance on developing wholesale markets, commenting that the lessons learned through wholesale transactions would be instructive as to potential benefits that may enure from retail competition. The Public Staff also advocated a series of public seminars providing various points of view regarding restructuring.

The Commission received comments and several seminars were scheduled and conducted. On May 7, 1996, after the issuance of Federal Energy Regulatory Commission Orders 888 and 889, the Commission held the Sub 77 proceeding in abeyance until further notice. At the same time, the Commission essentially adopted the Public Staff's recommendation on vigorous wholesale competition and initiated a proceeding to determine actions anticipated by electric utiitites pursuant to the FERC action.

E-100, Sub 78 - Wholesale Competition: This Docket was initiated by the Commission subsequent to FERC Orders 888 and 889 and sought to determine what acitvities Investor Owned Utilitites and other electric providers in North Carolina were taking pursuant to FERC initiatives and what activities were necessary to increase wholesale competition in the North Carolina and the surrounding region. Comments were filed by all parties and the matter remains before the Commission. By Order dated September 23, 1997, the Commission sought greater detail regarding the issues surrounding wholesale competition and information detailing how utilities were responding to the evolving wholesale market. By Commission Order dated June 18, 1998, the proceeding was held in abeyance as a result of changes to the IRP rules and the legislative mandate to consider restructuring with the formation of the Study Commission on the Future of Electric Service in North Carolina.

Restructuring Presentations: Beginning in early 1998, the Commission initiated an informal procedure by which interested stakeholders would provide informational presentations to the Commission and public with regard to positions on electric industry restructuring issues. These infomational sessions, typically provided on Monday afternoons in the Commission hearing room in Raleigh, lasted from one to two hours. The schedule of past presentations is contained on the Commission's Restructuring web page.

Study Commission on the Future of Electric Service in North Carolina: In April of 1997, the Governor signed Senate Bill 38, enacting the Study Commission on the Future of Electricity in North Carolina. This Committe was comprised of 23 members representing various electric industry stakeholders. It is required to issue an interim report to the General Assembly by the close of the short legislative session in 1998 and a complete report in 1999. The Bill requires the Committee to consider 20 issues surrounding restructuring as described in the Bill text. As part of its study, the Commission participated in eight public hearings scheduled throughout the state and received public comments and reply comments. The Public Staff also filed comments with the Study Commission.

The Study Commission retained Research Triangle Institute (RTI) as a consultant regarding many of the matters of restructuring. In July of 1998, RTI published a rate comparison study (pdf document) of national and regional electric rates. In November, RTI presented a summary document (pdf document) representing the public comments before the Study Commission from the eight public hearings conducted throughout North Carolina. In January of 1999, RTI published a summary document containing the written comments to the Study Commission.

RTI has published a series of documents covering stranded cost estimates: (1) Volume One: Policy Options for Municipal Power Agencies (March 1999); (2) Volume Two: Options and Issues (September 1999); and (3) Volume Three: Estimates of Stranded Costs and Recovery Options (September 1999).

Also in March of 1999, RTI published a document discussing the reliability considerations concerning Electric Restructuring in North Carolina. In August of 1999, RTI published a document discussing policy options for North Carolina's Municipal Power Agencies. In September of 1999, RTI published a report covering government tax and financing policy impacts.

Sites of Interest for Electricity Restructuring:

This web page was last updated on May 24, 2000. Questions or comments should be e-mailed to the pagemaster.