Regulatory process for new Duke Energy plant speeds down fast track

A highly specific piece of North Carolina legislation is forcing environmental advocates to act quickly as the expedited approval process created by the law barrels toward a Feb. 29 decision.

Sen. Tom Apodaca of Hendersonville filed the bill, the Mountain Energy Act of 2015, last May 21, the day after Duke Energy announced plans to replace coal burning generators at Lake Julian with new, natural-gas-fired units. The legislation established an expedited decision-making schedule of 45 days from the date of Duke’s application to the North Carolina Utilities Commission for approval. Although unusual, this type of legislation has been employed at least once before in the state, when Duke Energy replaced coal-fired generating units at the H.F. Lee Energy Complex near Goldsboro.

Things haven’t gone entirely smoothly for Duke Energy since the tailored legislation passed the North Carolina Senate on June 11, 2015. Duke’s initial plan to bring a new high-voltage power line into the region from upstate South Carolina eventually was scrapped on Nov. 4 in the face of massive public opposition. At the same time, Duke brought forward a revised modernization plan for two new gas-fired units at Lake Julian, with a contingent unit to be built by 2023 if the region’s demand for electricity continues to grow at its current rate.

Even as they celebrated Duke’s decision to pull the plug on the transmission line plan, environmental and community groups immediately shifted their attention to the specifics of the utility provider’s new proposal. Groups, including MountainTrue, the Sierra Club and the North Carolina Sustainable Energy Association (NCSEA), pressed Duke for more information about how the company arrived at its projections of future electrical demand in the region. The groups pushed the company to hold off on planning for the third natural gas unit while efforts to develop cleaner energy sources and to reduce demand had time to take effect.

On Jan. 15, Duke filed a certificate of public convenience and necessity (CPCN) with the Utilities Commission and the clock started counting down the 45-day period mandated by Apodaca’s legislation.

On Jan. 26, the only public hearing on Duke’s plan drew hundreds of citizens to the Buncombe County Courthouse. Many of those testifying asked Duke to build a smaller, cleaner facility and to delay planning for the proposed third unit.

Those wishing to weigh in as interveners — parties recognized by a court as representing interests not otherwise represented in the matter — faced a Feb. 12 deadline.  The Utilities Commission staff will present its findings on Duke’s application at the state Utilities Commission’s regular staff conference on Monday, Feb. 22, in Raleigh.

According to the timeline established by the Mountain Energy Act, the commission must announce a decision on Duke’s proposal by Feb. 29.

Energy plan

Duke’s CPCN application stuck close to what the company outlined in its Nov. 4, 2015, announcement with regard to the number and size of gas-fired generating units the company proposes to build at Lake Julian. Activists were dismayed, however, to find that the 15 megawatts of solar-generating capacity, which Duke had promised in its revised modernization plan, were not part of the CPCN.

In its application, Duke wrote, “The new solar generation facility will be subject to a future CPCN application once the coal-unit demolition plans have been sufficiently completed to determine the site configuration that will enable the optimum amount of new solar generation at the Asheville site for the benefit of the Company’s customers.”

Utility-scale battery storage, another feature in Duke’s revised modernization plan, also was not included in the current CPCN.

Natural gas for the Lake Julian plant will be provided by a new pipeline being constructed by the Public Service Company of North Carolina, according to Duke. Though natural gas will be the primary fuel for the units, Duke explained, the units will be designed to also burn fuel oil as a backup fuel source.

The need for the third 186 megawatt contingent gas-fired generator, Duke argued, results from the company’s decision to cancel its plans for a new high-voltage transmission line. Without an outside source of reserve power, projected future increases in peak power demand will require additional generating capacity to ensure the company has adequate reserve capacity. However, Duke did commit to “work aggressively to transition to a cleaner and smarter energy future” through community engagement, investment in distributed energy resources and promotion of demand management and energy efficiency programs. These measures, according to Duke, could delay or eliminate the need for the contingent unit.

Parties weigh in

In comments and affidavits submitted by the Feb. 12 deadline, a variety of interests have weighed in.

The Henderson County Board of Commissioners filed a statement “fully and wholeheartedly” in support of Duke’s proposal.

Environmental groups, however, were less enthusiastic. The Southern Environmental Law Center filed comments on behalf of environmental-advocacy groups MountainTrue and the Sierra Club. The Center entered into a legally-binding nondisclosure agreement to access confidential data submitted by Duke Energy in its application, and the group retained energy-industry expert Richard Hahn to analyze the confidential data.

Hahn’s conclusions, contained in the Center’s filed statement, address what he considers flawed aspects of Duke’s case. According to the statement:

• Duke failed to support its claim that adequate importation of power into its western region will be unfeasible due to transmission limitations.
• Duke’s method for determining local generation requirements for the purpose of reliability “appears to exceed” standards set by the National Electric Reliability Corporation, resulting in an overstated need for capacity.
• Even if Duke’s assumptions were valid, the capacity of the project is excessive. A smaller project would provide “virtually the same level of local reliability.”
• The facility proposed by Duke would not be the best fit with customer-demand patterns in the western region.
• Duke increased its system-wide reserve margin to 17 percent in 2015 from 14.5 percent in previous years. The need for the increase is not supported by the study used to justify it.
• Duke has not adequately explored alternatives to building the proposed plants, such as renewable energy sources, demand management, energy efficiency and opportunities for purchasing power from other companies.

In a statement, MountainTrue and the Sierra Club called Duke Energy’s proposal “unjustified, oversized and a waste of rate-payer money.”

The N.C. Sustainable Energy Association, which also received access to Duke data after agreeing not to disclose it, focused its remarks on Duke’s contingent third generating unit. The organization submitted an analysis, parts of which were omitted from the public version of the NCSEA’s comments, which concludes: “The public convenience and necessity does not require issuance of a CPCN for the 186 MW CT [combustion turbine].”

The North Carolina Waste Awareness and Reduction Network (NCWARN), in partnership with The Climate Times, asked the Utilities Commission to either hold an open public meeting where evidence can be presented by multiple parties or to deny the application.

NCWARN argued that the 45-day time period established by the Mountain Energy Act is “both abbreviated and arbitrary.” The single public meeting provided by the act, the organization says, is insufficient to allow meaningful consideration by the Utilities Commission.

Duke responds

While she declined to address specific criticisms lodged by environmental advocacy organizations and individual citizens, Megan Miles of Duke’s corporate communications department did say, “As stated in our CPCN filing, we believe the most reliable and cost-effective way to serve the Duke Energy Progress (DEP) western region/Asheville is with local generation, as reflected in the company’s current plan to retire the Asheville coal units and replace them with natural gas units.”

Miles reiterated statements in Duke’s application regarding the utility provider’s plans for solar energy generation and battery-based power storage at the Lake Julian site: “The company will file a future CPCN application to seek approval for a minimum of 15 megawatts of new solar generation over the next seven years after the Asheville Plant’s coal units have been decommissioned and coal ash excavation is completed. The company also plans to seek approval to install a minimum of 5 megawatts of utility-scale electricity storage over the next seven years.”

She said that Duke Energy will respond to commenters’ specific objections at the NCUC staff conference on Feb. 22, adding that Duke’s application addresses many of the issues outlined above.

Possible choices

“Many different parties are raising questions and concerns about the size of Duke’s proposed facility and whether it really needs that size of facility, on that timetable, to serve Duke’s western region customers,” says Gudrun Thompson, an attorney with the Southern Environmental Law Center.

According to Thompson, who will attend the Feb. 22 Utilities Commission meeting, the commission must make a decision within the timeline established by the Mountain Energy Act. Thompson outlined what she sees as several possible choices regulators might make by Feb. 29. The regulators could deny Duke’s application if they find that the utility provider did not demonstrate the need for it. Or the NCUC could deny the current application with the understanding that Duke can reapply.

Another possibility: The commission could grant approval for part of what Duke is proposing, a course of action that has precedent in the commission’s February 2007 approval of one of two proposed coal-fired generators for Duke’s Cliffside plant in Cleveland and Rutherford counties.

The commission could approve Duke’s plans while requiring the utility to close coal-fired plants in other areas, in addition to the units Duke proposes to retire at Lake Julian, as the NCUC did in Wayne County in 2009. That facility, which replaced the existing H.F. Lee coal-fired plant, was approved under fast track legislation similar to the Mountain Energy Act.

Finally, says Thompson, the NCUC could approve Duke’s application and require the company to make additional investments in cleaner forms of energy.