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Much at Stake for Duke Energy and the Solar Industry

Solar Panel

Duke Energy has proposed sweeping changes to the amounts it pays to purchase solar-generated power and the terms of its contracts with solar developers. Duke Energy has raised those changes in the 2016 Avoided Cost Proceeding pending before the North Carolina Utilities Commission. The filings in that proceeding can be found at http://starw1.ncuc.net/ncuc/portal/ncuc/page/docket-docs/PSC/DocketDetails.aspx?DocketId=ee736b71-4f22-4414-b0a1-33a9d339b440.

Federal law, called the Public Utility Regulatory Policies Act of 1978 (PURPA), requires electric utilities to purchase power generated by qualified renewable energy projects, including solar developers. PURPA mandates that, when purchasing power from qualified small power producers, including solar companies, electric utilities must pay prices equivalent to their “avoided costs” of not producing power themselves.  The NC Utilities Commission determines in a biennial Avoided Cost Proceeding the amount of the electric utilities’ avoided costs, and thus the rates to be paid by electric utilities.

In June 2016, the Commission initiated the 2016 Avoided Cost Proceeding.  The evidentiary hearing in this docket was completed in mid-April, and the Commission will now decide a number of significant policy issues raised by Duke Energy.  Those issues will have wide ranging impact on the electric utilities, the solar industry, and consumers.

Duke Energy believes that North Carolina’s fast growing solar industry is costing consumers too much, and is seeking more control over future development.  Duke claims that it is overpaying solar developers – by about $1 billion over the next 12 years under its current contracts – and is asking that the Commission reduce the amount of its avoided costs.  Duke Energy is also seeking to reduce the size of projects that qualify for standard contracts (from 5 megawatts to 1 megawatt or less), and to shorten the length of purchase power agreements.  In addition, Duke Energy seeks to alter the well-established paradigm in which it enters into contracts with solar developers by switching to a competitive bidding process.  If the Commission were to agree with Duke Energy, the effect would be (1) a reduction in the amount that Duke Energy will pay to solar developers, (2) a reduction in the size of solar projects eligible for standard contracts, (3) a shorter term for purchase power agreements, and (4) a RFP process for solar developers.

Many of the solar energy developers intervened in the docket.  The solar developers dispute Duke Energy’s claim that it is overpaying for solar, and challenge how Duke Energy has calculated its avoided costs.  They also contend that the changes requested by Duke Energy would violate PURPA.  Smith Moore Leatherwood represents two of the intervenors in the proceeding.  A final decision is expected later this summer.



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