Legislative Watch

NC Deregulation Formally Delayed

During the last week of February 2002, a North Carolina legislative panel said their May 2000 report calling for deregulation of North Carolina’s electric utility business by 2006 is, for all intents and purposes, obsolete. The Study Commission on the Future of Electric Service in North Carolina is set to formally drop its recommendation to lawmakers. That should come as good news to the General Assembly as they deal with the politically sensitive state budget crisis.

The recommendation would also buy the state’s municipal utilities (Electricities) additional time to pay down long-term debt. In the past year and a half they have shaved nearly $200 million off the previous balance of $5.4 billion. It was the size and uncertainty of the Electricities debt that dead-ended most serious considerations of deregulation. The Study Commission had proposed selling both the generation and distribution assets of the 51 participating municipalities.

Nevertheless, Sen. David Hoyle, the commission’s co-chair, said it is "not in the state’s best interest to say deregulation is a dead issue."

Previous legislative updates

Study Will Collect Dust While Legislators Fret Deregulation

On Wednesday, March 8, 2000 the Commission on the Future of Electric Service released a draft proposal that calls for open competition and consumer choice by the year 2006.   The three-page draft proposal called for the sale of the generation assets of the state's municipal power agencies and the distribution assets of 51 participating municipalities.

Funds from the sales would be used to help the municipalities pay off part of the $5.4 billion debt they incurred from investing in nuclear power plants built by Duke Power and CP&L.

The plan does not specify how to make up the debt that would still be owed by the municipalities even after their generation and distribution assets had been sold. Both Duke and CP&L, who have offered to buy back shares in the nuclear plants they sold to the cities as well as the cities' distribution infrastructure, have proposed a surcharge on all North Carolina utility customers over 17 years to retire the rest of the debt. However the municipalities, through their statewide organization Electricities, argue that the cities should be allowed to
keep their distribution assets.

Despite delivery of the commission's report, no significant legislation geared towards the deregulation of North Carolina's electric utilities is expected during the 2001 session.

The Commission on the Future of Electricity in North Carolina:  The commission is charged with the task of reviewing all aspects of deregulation of North Carolina's electric utility industry.  Seated on the commission is Chuck Terrell, executive vice president of the North Carolina Electric Membership Corporation which represents the state's 27 electric cooperatives.

HB476 Signed into Law
    Governor James B. Hunt signed HB 476 into law on June 16, 1999. The law allows allows North Carolina's electric cooperatives to invest in, operate, own or acquire for-profit businesses that provide energy, telecomm, and sewer and water products and services. These businesses will have oversight from the N.C. Utilities Commission (NCUC) to ensure the businesses pay fairly for any shared employees, services or equipment. No director or spouse of a director of an electric cooperative may be employed or have any financial interest in any of the co-op’s subsidiaries.
    The legislation also contains several parameters for these business entities. For example, electric co-ops may not start up a new petroleum or propane gas business, they may only partner with or acquire an existing business. Transactions between the EMCs and their  subsidiaries will be subject to oversight from the NCUC.
    Another limit placed on the new business entities, with the exception of water and wastewater services, is that they may not be financed with loans or grants from United States Department of Agriculture. The legislation limits the electric co-op from investing more than 10 percent of their assets in aggregate into these businesses.
    By all accounts, the grassroots effort put forth by the N.C. electric cooperatives’ members, directors and employees was the key in the legislation’s passage. Throughout the weeks of debate, co-op supporters walked the halls of the legislature, met with legislators in their home districts, made phone calls, wrote letters and e-mail to urge their local representatives to approve the bill.
    North Carolina’s electric co-ops supported the introduction of HB 476 to clarify their ability to react to the changing business climate and to provide more choices for rural consumers as well as others. The co-ops’ ability to offer additional products and services will allow all North Carolinians to enjoy the benefits and convenience of essential services at a competitive price.
    Electric co-ops will now be able to join other N.C. utility providers with the ability to meet their obligations, to invest wisely and generate income to better serve their membership. These new business ventures are good for local communities and the state because they create jobs, provide needed services and support local economic development activities.

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