Duke Energy’s plan to zero out its carbon pollution all but ignores a federal loan program that could save ratepayers hundreds of millions of dollars and enable more clean energy, the state’s ratepayer advocate said in recent filings.
And since the loans run out in September 2026, state Public Staff and clean energy advocates say time is running out for Duke to correct course.
“This is a singular bite at the apple that they’re going to get,” said Jeremy Fisher, principal adviser for climate and energy at the Sierra Club. “So, we’re not in a position to sit here and say, ‘hey Duke, in your next [long-term plan], you should model it.’ This is the moment.”
Public Staff called attention to the $250 billion federal Energy Infrastructure Reinvestment Program in its assessment of Duke’s proposed biennial carbon reduction plan, the first of which was approved by state regulators at the end of 2022, months after the surprise passage of the Inflation Reduction Act.
In accepting Duke’s plan that year, regulators noted: “it is appropriate for Duke to incorporate the impacts of the Inflation Reduction Act… and other future legislative changes… into its [Carbon Plan and long-range generation] proposal that it will file with the Commission on or before September 1, 2023.”
But Public Staff and other intervenors say the utility did not fully do so, at least when it comes to the Energy Infrastructure Reinvestment Program.
“The Public Staff has concerns regarding Duke’s failure to model the [loan] program,” wrote Jeff Thomas, an engineer with the agency. The program, he added later, “represents a significant opportunity for cost savings for ratepayers tied to the deployment of new clean energy resources.”
The loans are perhaps less well known than the Inflation Reduction Act’s tax incentives for everything from electric vehicles to solar panels to offshore wind turbines.
But they’re just as important, if not more so, especially in light of the North Carolina law that requires Duke to reduce its carbon emissions in a “least cost” manner.
Fisher said utilities can take advantage of the program to varying degrees, with proportionate savings for ratepayers.
In the “ideal use of this program,” Fisher said, utilities can refinance outstanding loans for their retiring coal plants and combine them with new clean energy investments, all for a low interest rate. Then there’s a “lesser version,” in which a utility doesn’t transfer its balance on old coal plants but does finance new clean energy projects through the federal government. Finally, he said, there’s “one more step down.” That’s where a company like Duke essentially switches to the government debt it would otherwise owe a bank.
In a recent paper, the clean energy think tank Rocky Mountain Institute explained why this last option is least desirable for ratepayers.
“If utilities do nothing more than use [Energy Infrastructure Reinvestment] loans to displace corporate debt,” researchers wrote, “overall ratepayer savings will be minimal, since most utilities can already borrow at reasonably attractive interest rates without the added complication and expense of participating in a government program.”
Yet, Fisher said, testimony from the state-sanctioned customer advocate suggests this “stepped down” version of the loan program is what Duke envisions.
Michelle Boswell, director of Public Staff’s accounting division, relayed an example of a Missouri utility that could maximize the Energy Infrastructure Reinvestment program and save its customers over $900 million. “While these ratepayer benefits come at the expense of lower earnings for the utility,” Boswell noted, “they are consistent with the least-cost mandate contained in [state law].”
At a technical hearing last week before regulators, Thomas reiterated that position. “As the ratepayer advocate, cost is a major concern,” he said. “We believe there are ways to control costs. One proposal is that Duke should take aggressive advantage of the Energy Infrastructure Reinvestment loan program.”
Doing so could save ratepayers more than $400 million through 2032, Thomas said last week, and lead to increased renewable and storage deployment.
Testifying on behalf of Attorney General Josh Stein, expert witness Edward Burgess stressed the loan program could be utilized to cover transmission upgrades needed to connect more solar and storage to the grid.
“Reconductoring of transmission lines could allow for significantly greater renewable resource availability,” Burgess wrote. “This could be done much more cost-effectively with assistance from the Energy Infrastructure Reinvestment program.”
Indeed, advocates say the federal program doesn’t just promise to lower ratepayer costs for the clean energy Duke currently proposes. By changing the economic calculus, the loans could spur the company to invest in more storage and solar and retire its coal plants sooner.
Duke’s proposed 1,360-megawatt gas plant outside Roxboro in Person County is a case in point.
In theory, rather than replace coal smokestacks on Hyco Lake with gas-fired units, Duke could build battery storage and clean energy on the site instead.
That investment would qualify the utility for an additional 10% federal tax incentive, since it would be located within 30 miles of a retiring coal plant. Much of the outstanding debt on the old fossil fuel plant and the solar and battery investments could be leveraged into a low-interest loan through the federal government.
Testifying for several clean energy advocacy groups, expert witness Maria Roumpani said that Duke may not be taking full advantage of this additional 10% incentive, since it assumes that 60% of its new standalone batteries will be sited at retired coal sites.
“Although the approach seems reasonable,” Roumpani wrote, “it might lead to the analysis overlooking certain opportunities to replace coal capacity.”
The Energy Infrastructure Reinvestment Program and the 10% bonus credit for former coal plant communities could also work in concert with so-called securitization of Duke’s coal-fired power plants, in which the remaining book value of plants is paid off through bonds backed by ratepayers.
The same state law requiring Duke to zero out its carbon pollution also calls for only half of the book value of its least efficient coal plants to be securitized. Theoretically, advocates say, the remainder could be paid off through the federal loan program.
Asked about Public Staff’s assertion that the utility didn’t account for the federal loan program in its latest proposal for phasing out carbon, spokesperson Bill Norton said Duke was still reviewing the filing.
He added, “we have already engaged with the Department of Energy and other utilities to learn more about the… program and see if it provides benefits to our customers. We will pursue all federal funding that we believe can reduce energy transition costs for our customers in a manner that protects reliability, supports our coal plant communities and accommodates North Carolina’s growing economy.”
Public Staff and others say time is of the essence. The loan program has a limited amount of funds, and records suggest other utilities have already applied for nearly half the total. That means Duke needs to begin applying for the loans as soon as possible, and, critics argue, should have already started.
“By failing to examine this option,” the attorney general said in its filing, “Duke may be missing out on a once-in-a-decade opportunity to save millions for its customers.”
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