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Failure to Reform 40 Year Old Law will Cost NC Consumers $1 Billion

North Carolina utility rate payers stand to overpay $1 billion dollars if our state does not reform the policies implemented under the Public Utility Regulatory Policies Act of 1978 (PURPA). This 40-year-old law, which was enacted in response to the energy crisis of 1973, requires utility companies to pay third party producers of energy, also known as qualifying facilities, “avoided costs” representative of the cost the utility would have paid if it produced the energy itself. Since PURPA allows each state to determine how it is implemented, previous North Carolina Utilities Commissions (NCUC) adopted consumer unfriendly interpretations of the law. Specifically, the NCUC requires that qualified facilities in North Carolina producing up to 5 MW of energy be eligible to receive a standard contract with a fixed long-term avoided cost rate for up to 15 years, no matter the needs of the system or actual value of the resource in the marketplace. As a result, these contract prices, combined with today’s low energy price, could force consumers to overpay by nearly $1 billion over the 15 years of the contracts.

In order to keep rates competitive for North Carolina businesses across the state, elected officials must implement a solution that keeps downward pressure on rates for consumers and increases reliability. North Carolina is a leading state in renewable energy (the number two state in the country for solar energy), adding hundreds of facilities to the grid each year. As we grow renewable energy resources, it is imperative that fair and balanced policies are put in place to keep costs competitive and improve operational sustainability. Reforming PURPA standards will foster competitive rates, greater reliability and a fair rate of return for third party facilities, all while continuing to make North Carolina a leader nationwide in renewable resource production.

The NC Chamber maintains our long-standing commitment to a forward-thinking, “all-of-the-above” energy strategy in North Carolina, as all forms of energy are important to diversifying resources and cultivating a competitive economy. Revising PURPA is consistent with such a strategy. Asking North Carolina consumers to pay an extra $1 billion is harmful to economic growth, which is why we are calling on legislative leaders to take action to adopt policies that will secure more reliable and affordable energy.

Gary J. Salamido
Vice President, Government Affairs
North Carolina Chamber