AN ACT to DIRECT THE NORTH CAROLINA UTILITIES COMMISSION TO CONDUCT A STUDY OF NORTH CAROLINA WHOLESALE ELECTRICITY MARKET REFORMS AND ISSUE A REPORT TO THE GENERAL ASSEMBLY REGARDING ANY PROPOSED REFORMS and public benefits associated therewith.

Whereas, the weather events of February 2021 in Texas led to widespread power outages, death, and property damage, North Carolina must be prepared for a similar weather event; and

Whereas, much of the electric service provided in North Carolina is currently provided by vertically integrated providers of electric distribution and transmission services; and

Whereas, the State has adopted legislation, including Session Law 2007‑397 and Session Law 2017‑192, to diversify the resources used to reliably meet the energy needs of consumers and provide economic benefits to the State; and

Whereas, North Carolina seeks to: (i) expand its development of new, low‑cost electricity resources in the State; (ii) encourage additional private investment in these resources as well as ancillary businesses; (iii) create new tax bases and economic opportunities; and (iv) accelerate the deployment of zero emission resources; and

Whereas, stakeholders that participated in the North Carolina Energy Regulatory Process identified common outcomes to reduce greenhouse gas emissions, improve integration of distributed energy resources, improve customer choice of energy sources, provide energy affordability and bill stability, and align regulatory incentives with cost control and policy goals; and

Whereas, electricity sector regulatory framework changes to the wholesale electricity market may require changes to State law as well as federal authorization; and

Whereas, the South Carolina legislature authorized a study to be completed on November 1, 2021, that examines the benefits of various restructuring options for electricity markets associated with electricity generators, transmitters, and distributors in South Carolina; and

Whereas, regional and interstate arrangements may require changes to laws in states other than North Carolina; Now, therefore,

The General Assembly of North Carolina enacts:

SECTION 1.(a)  The North Carolina Utilities Commission (Commission) shall conduct a study to evaluate reform of the regulatory wholesale electricity market in North Carolina. In the conduct of this study, the Commission shall:

(1)        Evaluate proposed market structures, including all of the following:

a.         Establishing a regional transmission organization (RTO) within the geographical boundaries of North Carolina and South Carolina or a larger area such as the southeast United States.

b.         Establishing an energy imbalance market within the geographical boundaries of North Carolina and South Carolina or a larger area such as the southeast United States.

c.         Participation in the Southeastern Energy Exchange Market.

d.         In addition, the Commission may examine any other market reforms that the Commission determines appropriate, including (i) joining an existing RTO, (ii) developing joint dispatch agreements beyond the current Duke Energy Carolinas and Duke Energy Progress agreement to include additional utilities in neighboring states and regionally, and (iii) developing a customer choice program that allows large customers, either at a single site or as an aggregate of multiple sites, to choose an independent electricity provider over their existing provider.

(2)        Examine all of the following matters:

a.         The cost, benefits, and risks to State and local government, utilities, independent power producers, businesses, and customers of all classes regarding the following aspects of the State's current electricity system and potential market reforms on (i) electricity generation and capacity adequacy and diversity, (ii) transmission systems, (iii) customer service and rates, (iv) environmental quality, (v) economic opportunity, and (vi) State regulation of electricity systems.

b.         The legal and procedural requirements in North Carolina, at the Federal Energy Regulatory Commission, or in other states associated with adoption of any recommended electricity market reform measures, including identification of existing laws, regulations, and policies that may need to be amended in order to implement the electricity market reform measures.

c.         The impact to existing interstate and interregional arrangements from electricity market reform measures.

d.         Existing nuclear power plant units, in operation and located in this State or in the balancing authority of electrical utilities or public power agencies operating in this State, which provide an emissions‑free source of power while also providing significant employment and economic benefits. Direction to the Commission to examine this matter shall not be construed as an indication of legislative intent to force divestiture of ownership or cessation of the operation of these nuclear power plants.

e.         The potential impacts, including costs and benefits, of electricity market reform measures on disadvantaged or vulnerable populations and/or communities.

(3)        Consider how to maintain or enhance the following values under the proposed wholesale market reform structures: (i) stakeholder input into electricity regulatory and policy development processes and (ii) social equity in providing affordable electricity to all communities and customer classes.

SECTION 1.(b)  The Commission shall initiate the study required by this section no later than 30 days after the date this act becomes law and, by that date, shall establish an advisory board for the conduct of the study in order to ensure the broad concerns of North Carolina are considered. The advisory board, at a minimum, shall include all of the following:

(1)        The State Energy Director of the Department of Environmental Quality.

(2)        The Executive Director of the North Carolina Public Staff, or the Executive Director's designee.

(3)        The Attorney General, or the Attorney General's designee.

(4)        The North Carolina President of Duke Energy, or the President's designee.

(5)        The North Carolina President of Dominion Energy, or the President's designee.

(6)        Executive leadership from municipal and cooperative utilities, or their designees.

(7)        Executive Directors of the North Carolina Clean Energy Business Alliance and the North Carolina Sustainable Energy Association, or their designees.

(8)        A representative set of stakeholders from the North Carolina Energy Regulatory Process selected by the Commission, including all of the following:

a.         Two representatives of residential consumers of electricity.

b.         Two representatives of commercial consumers of electricity.

c.         Two representatives of industrial consumers of electricity.

d.         Two representatives of power producers.

e.         Two representatives with subject matter expertise from the academic community.

f.          Two representatives of the environmental advocacy community.

g.         Two representatives of the social equity and justice community.

SECTION 1.(c)  The Commission shall report its findings and recommendations resulting from the study, including any proposals for legislative action, on or before the convening of the 2023 Regular Session of the General Assembly. This deadline may be extended by up to one year as the Commission deems necessary in order to adequately evaluate all matters required by the study. At a minimum, the Commission's recommendations shall address whether legislation should be enacted to reform North Carolina's wholesale electricity marketplace, and if so, the Commission shall identify the specific manner in which wholesale reform should be implemented. If the Commission recommends legislative action to reform the State's wholesale electricity marketplace, the report shall (i) include draft legislation, (ii) identify applicable requirements under statute and rule, and (iii) include a proposed schedule that should be established so that the recommended wholesale market reform will result in net benefits without undue risk for the State, utilities, businesses, and residents.

SECTION 1.(d)  For purposes of this section, all of the following definitions apply:

(1)        Regional transmission organization or RTO means an entity established for the purpose of promoting the efficiency and reliability in the operation and planning of the electric transmission grid and ensuring nondiscrimination in the provision of electric transmission services, which meets the minimum criteria established by the Federal Energy Regulatory Commission under 18 C.F.R. § 35.34.

(2)        Energy imbalance market means a voluntary market for dispatching real‑time energy across utility service territories in which each participating utility retains ownership and control of its transmission assets but opts to bid generation into a centralized dispatch authority.

(3)        Southeastern Energy Exchange Market means a proposed 15‑minute automated energy exchange market between balancing authorities in the southeastern United States involving over 15 entities.

(4)        Joint dispatch agreement means a type of arrangement where participating utilities agree to jointly dispatch generation resources to meet load requirements across their footprints, and each participating utility retains ownership and control of its transmission assets.

SECTION 1.(e)  There is appropriated from the General Fund to the Utilities Commission the sum of five hundred thousand dollars ($500,000) in nonrecurring funds for the 2021‑2022 fiscal year to engage an independent consulting firm with experience and expertise in wholesale electricity markets to assist the Commission with the study required by this section.

SECTION 2.  This act is effective when it becomes law.