On October 16, the North Carolina Utilities Commission approved a second mammoth Duke combined cycle (CC) gas plant based on Duke’s speculative load forecasts. This gas plant, which will be located across the street from Woodland Elementary School in Person County, will expose Duke customers to significant rate increases and expensive fossil gas costs for decades and drive significant pollution, including greenhouse emissions. That the approval of this plant was issued the day after the Commission concluded a two-day Large Load Technical Conference in which several experts provided data demonstrating that Duke’s projected load forecast likely overestimates the amount of large customer load that will come online in the coming years is especially disappointing.
During the hearing on July 22, SACE witness Lucy Metz of Synapse presented testimony that highlighted significant concerns with this proposed gas plant. Witness Metz testified that “DEP has not demonstrated that the Proposed Facility is lower cost than a portfolio of dispatchable capacity (e.g. battery storage or even combustion turbines) paired with solar and wind.” She recommended that the Commission deny Duke’s request or, at a minimum, require Duke to issue an all-source request for proposals prior to ruling on the request to determine if there are indeed resources available to provide both the capacity and the energy needed to serve future load growth. Even the Public Staff testified that the second CC may not be the least cost solution.
In the order approving the plant, the Commission notes that modeling in Duke’s 2023 CPIRP establishes a “need” for the second CC. But this modeling from almost two years ago does not reflect the current rising costs associated with power plant construction and firm gas transportation contracts. The estimated cost of this plant at the time of filing is confidential, but Duke Energy has proposed building a similar gas plant in Indiana that is only 100 MW larger at a cost of $3.33 billion. What if the cost of Duke’s second Roxboro gas plant balloons to this amount? Would it still have been selected by the modeling in the 2023 CPIRP proceeding as the least-cost resource to meet the forecasted need? I think that’s highly unlikely.
And what about the associated pipeline costs that will be incurred to supply both Roxboro CCs at the Person County site 47 miles away from the nearest interstate gas transmission pipeline? This plant (along with the first CC approved last December) will require not-yet built pipeline capacity from an expansion project on the Williams Transco pipeline and/or a not-yet built Mountain Valley Pipeline expansion as well as redelivery along the not-yet built 55-mile Enbridge T15 pipeline. Duke has contracted for firm pipeline capacity on all three of these projects, but as with the cost of the plants, these pipeline contracts are confidential too. SACE has done a deep dive on escalating pipeline costs in the Southeast, and we have determined that these costs are becoming so significant that their net present value should be evaluated as part of the total cost of the plant. The North Carolina Public Staff and the Commission Staff can both get access to these confidential pipeline contracts as a part of the Commission’s review of Duke’s proposed gas plant, and they can calculate the net present value themselves to understand just how significant they are (potentially a quarter of the cost of the plant itself or higher). And unlike the cost of the plant, which will face additional scrutiny in an upcoming rate case, the cost of firm pipeline transportation is passed straight through to ratepayers. Duke has no skin in the game and no incentive to negotiate in the ratepayers’ interest on what is essentially a fixed asset (pipeline capacity) that could run the lifetime of the plant itself.
During the Large Load Technical Conference held October 14 and 15, Commissioner Karen Kemereit stated that the Commission wanted to “make sure that we’re not over-forecasting and then over-building the system for load that doesn’t actually show up.” We applaud the Commission for recognizing the risks of over-forecasting and over-building the system and hope that there will be continued scrutiny of Duke’s load forecasts. It is in Duke shareholder’s financial interests to overestimate future demand, which justifies additional large capital expenditures like these Roxboro gas plants. Duke’s profits are derived from these kinds of capital expenses, which is why it is important to look behind Duke’s assumptions and look for alternative, less costly ways to meet our future energy needs. In a time when the sector is changing rapidly in many ways, it is important that resource decisions are based on information that is real, recent, and transparent.
