This spring, each state’s legislature flirted with the RTO possibility. The South Carolina bill is not unlike North Carolina House Bill 589, which became law in 2017, requiring Duke Energy to procure a given amount of solar energy capacity through a competitive procurement process and also set up new programs for commercial, community, and residential solar. But Davis argues the bill is about more than solar, stating that “it’s really about something more fundamental: It is a first and important step away from the energy-production monopolies that have saddled South Carolinians with some of the highest electricity bills in the nation, and toward real competition through an open market of many buyers and many sellers that will provide downward pressure on the cost of producing energy.” The law addresses rooftop solar, large-scale solar, community solar, and resource plan reporting. Davis introduced the Energy Freedom Act, which was signed into law in May with bipartisan support.
In January, due partly to frustration over Santee Cooper management, Sen. Summer nuclear plant near Columbia, SC whose construction was halted in 2017 after incurring $11 billion in costs and only a fraction of the way to completion.
Santee Cooper was one of the owners of the V.C. Davis has argued that Santee Cooper, South Carolina’s state-owned electric and water utility dating back to the New Deal, should be sold to an investor-owned utility. If we equate clean with low-carbon, both Carolinas are well below the national average for CO 2 emissions per megawatt hour produced, due to their heavier contribution of nuclear and natural gas and renewables and lower reliance on coal.īut some argue that low-carbon energy investment would be more effectively fostered in a competitive wholesale market among independent producers that an RTO can provide than from the traditional rate-regulated investor-owned utility model that the Carolinas now follow. Meanwhile, there’s the growing public demand for clean energy. Both moves have generated reactions about the equity of the current rate approval process and whether an alternative to the current regulatory model is in order. Moreover, the company is seeking a change in North Carolina law to allow Duke Energy more flexibility on the timing of rate changes and the allowed rate of return on capital investments. Next door in North Carolina, the state’s largest utility, Duke Energy, is now seeking approval from the state utilities commission for a rate increase for the western part of its service territory to address grid upgrades, accelerating coal plant closures, and recovery of legacy costs associated with coal ash clean-ups. The project has been called largest financial failure in the history of South Carolina and is encouraging them to consider overturning how the power business works in their state. South Carolina ratepayers are currently faced with high costs from a nuclear construction fiasco. Right now, both Carolinas have electricity rates that are below the national average while the lights have been kept on pretty well when hurricanes do not have their way (as they have had for the last several years). Why The Interest In Shaking Up The Carolinas Market? North Carolina and South Carolina currently follow the traditional regulatory model without an RTO. Some of those 33 states, though, have a mix of the two-vertically-integrated monopolies that participate in competitive markets via an RTO. The governance choice is made at the state level 17 states have chosen to fully restructure by opening up wholesale and retail markets to competition, and 33 have opted to keep the regulated monopoly model. Those markets may be further opened up to competition at the retail level. The other is the “restructured” or “competitive” model in which wholesale power markets are subject to competition among generators, with prices typically determined through time-specific auctions run by an RTO.
One is the traditional “regulated monopoly” model, in which vertically integrated public utilities are granted sole provider status for a service territory in exchange for a state utility commission having control over the rates the utility can charge. There are fundamentally two forms of power market governance in the U.S. Let’s take a closer look at what’s motivating consideration of the shift, how the conversation has played out so far in each state, whether the RTO solution is likely to prove a panacea or a Pandora’s box, and what alternatives Carolinians could consider. Creating an RTO in the Carolinas could have dramatic impacts on investment, power prices, generation mix, environmental effects, and the distribution of benefits and costs between shareholders and ratepayers within the region.
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