A BILL TO BE ENTITLED
AN ACT to amend various provisions of the general statutes related to distributed generation and to direct the Utilities commission to perform an assessment of the costs and benefits of distributed generation.
The General Assembly of North Carolina enacts:

part i. clarify distributed generation must be considered in resource planning
SECTION 1.  G.S. 62‑2(a) reads as rewritten:
"(a)	Upon investigation, it has been determined that the rates, services and operations of public utilities as defined herein, are affected with the public interest and that the availability of an adequate and reliable supply of electric power and natural gas to the people, economy and government of North Carolina is a matter of public policy. It is hereby declared to be the policy of the State of North Carolina:
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(10)	To promote the development of renewable energy and energy efficiency in a manner that is consistent with the development of the least cost mix of generation.

	
	
(11)	To ensure that the development of renewable energy facilities does not result in stranded costs for existing generating units, including the relicensing of existing nuclear power facilities."

Part ii. amend contracts for qualifying facilities and clarify avoided cost requirements
SECTION 2.(a)  G.S. 62‑3(27a) reads as rewritten:
"(27a)	"Small power producer" means a person or corporation owning or operating an electrical power production facility that qualifies as a "small power production facility" under 16 U.S.C. § 796, as amended."
SECTION 2.(b)  G.S. 62‑156 reads as rewritten:
"§ 62‑156.  Power sales by small power producers to public utilities.
(a)	In the event that a small power producer and an electric utility are unable to mutually agree to a contract for the sale of electricity or to a price for the electricity purchased by the electric utility, the commission shall require the utility to purchase the power, under rates and terms established as provided in this section.
(b)	No later than March 1, 1981, and at least every two years thereafter, the Commission shall determine the rates to be paid by electric utilities for power purchased from small power producers, according to the following standards:
(1)	Terms of the Standard Contract. – The Commission shall approve standard contracts up to two years in duration for the purchase of power from small power producers for facilities that do not exceed 100 kilowatts of capacity. The standard contract shall allow the public utility to curtail power generated by the small power producer as needed to maintain economic dispatch and system reliability.
(2)	Avoided Cost to the Utility. – The rates paid by a utility to a small power producer shall not exceed, over the term of the purchase power contract, the incremental cost to the electric utility of the electric energy which, but for the purchase from a small power producer, the utility would generate or purchase from another source. A determination of the avoided costs to the utility shall include a consideration of the following factors over the term of the power contracts: the known and measurable expected costs of the additional or existing generating capacity which could be displaced, the known and measurable expected cost of fuel and other operating expenses of electric energy production which a utility would otherwise incur in generating or purchasing power from another source, and the expected security of the supply of fuel for the utilities' alternative power sources.
(3)	Availability and Reliability of Power. – The rates to be paid by electric utilities for power purchased from a small power producer shall be established with consideration of the reliability, availability, and need for the power.
(4)	Avoided Cost of Capacity. – The contract shall not require payment for capacity to the extent the electric utility lacks a capacity need during the term of the contract, as demonstrated through the electric public utility's most recent integrated resource plan approved by the Commission under G.S. 62‑110.1(c)."
SECTION 2.(c)  This section becomes effective July 1, 2017, and applies to rates approved by the Commission on or after that date.

Part III. AMEND REPS compliance
SECTION 3.(a)  G.S. 62‑133.8(a)(8) reads as rewritten:
"(8)	"Renewable energy resource" means a solar electric, solar thermal, wind, hydropower, geothermal, or ocean current or wave energy resource; a biomass resource limited to agricultural waste, animal waste, spent pulping liquors, combustible residues, combustible liquids, combustible gases, or landfill methane; waste heat derived from a renewable energy resource and used to produce electricity or useful, measurable thermal energy at a retail electric customer's facility; or hydrogen derived from a renewable energy resource. "Renewable energy resource" does not include peat, a fossil fuel, wood waste, or tire‑derived fuel."
SECTION 3.(b)  G.S. 62‑133.8(b)(2)c. reads as rewritten:
"c.	Reduce energy consumption through the implementation of cost‑effective energy efficiency measures or verifiable energy efficiency certificates."
SECTION 3.(c)  G.S. 62‑133.8(b)(2)e. reads as rewritten:
"e.	Purchase renewable energy certificates derived from in‑State or out‑of‑state new renewable energy facilities."
SECTION 3.(d)  G.S. 62‑133.8(h)(1)c. reads as rewritten:
"c.	All reasonable and prudent costs to comply with 16 U.S.C. § 824a‑3 or with any federal mandate that is similar to the requirements of subsections (b), (c), (d), (e), and (f) of this section that exceed the costs that the electric power supplier would have incurred under those subsections in the absence of the federal mandate."
SECTION 3.(e)  This section becomes effective July 1, 2017.

Part IV. Amend Cost Caps for REPS Compliance
SECTION 4.(a)  G.S. 62‑133.8(h)(4) reads as rewritten;
"(4)	An electric power supplier shall be allowed to recover the incremental costs incurred to comply with the requirements of subsections (b), (c), (d), (e), and (f) of this section and fund research as provided in subdivision (1) of this subsection through an annual rider not to exceed the following per‑account annual charges:
	
Customer Class	2008‑2011	2012 and thereafter	
Residential per account	$10.00	$12.00	
Commercial per account	$50.00	$150.00	
Industrial per account	$500.00	$1,000.00	"
SECTION 4.(b)  This section becomes effective July 1, 2017, and applies to cost recovery proceedings that are initiated on or after that date.

part v. FREEZE reps requirements
SECTION 5.  G.S. 62‑133.8 reads as rewritten:
"§ 62‑133.8.  Renewable Energy and Energy Efficiency Portfolio Standard (REPS).
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(b)	Renewable Energy and Energy Efficiency Standards (REPS) for Electric Public Utilities. –
(1)	Each electric public utility in the State shall be subject to a Renewable Energy and Energy Efficiency Portfolio Standard (REPS) according to the following schedule:
Calendar Year	REPS Requirement
2012	3% of 2011 North Carolina retail sales
2015 and thereafter	6% of 2014 North Carolina retail sales

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(c)	Renewable Energy and Energy Efficiency Standards (REPS) for Electric Membership Corporations and Municipalities. –
(1)	Each electric membership corporation or municipality that sells electric power to retail electric power customers in the State shall be subject to a Renewable Energy and Energy Efficiency Portfolio Standard (REPS) according to the following schedule:
Calendar Year	REPS Requirement
2012	3% of 2011 North Carolina retail sales
2015 and thereafter	6% of 2014 North Carolina retail sales
	
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(d)	Compliance With REPS Requirement Through Use of Solar Energy Resources. – For calendar year 2015 and for each calendar year thereafter, at least fourteen hundredths of one percent (0.14%) of the total electric power in kilowatt hours sold to retail electric customers in the State, or an equivalent amount of energy, shall be supplied by a combination of new solar electric facilities and new metered solar thermal energy facilities that use one or more of the following applications: solar hot water, solar absorption cooling, solar dehumidification, solar thermally driven refrigeration, and solar industrial process heat. The terms of any contract entered into between an electric power supplier and a new solar electric facility or new metered solar thermal energy facility shall be of sufficient length to stimulate development of solar energy; provided, the Commission shall develop a procedure to determine if an electric power supplier is in compliance with the provisions of this subsection if a new solar electric facility or a new metered solar thermal energy facility fails to meet the terms of its contract with the electric power supplier. As used in this subsection, "new" means a facility that was first placed into service on or after January 1, 2007. The electric power suppliers shall comply with the requirements of this subsection according to the following schedule:
	Requirement for Solar
Calendar Year	Energy Resources
2010	0.02%
2012	0.07%
2015 and thereafter	0.14%
	
(e)	Compliance With REPS Requirement Through Use of Swine Waste Resources. – For calendar year 2015, at least fourteen hundredths of one percent (0.14%) of the total electric power in kilowatt hours sold to retail electric customers in the State shall be supplied, or contracted for supply in each year, by swine waste. The electric power suppliers, in the aggregate, shall comply with the requirements of this subsection according to the following schedule:
	Requirement for Swine
Calendar Year	Waste Resources
2012	0.07%
2015 and thereafter	0.14%
	
(f)	Compliance With REPS Requirement Through Use of Poultry Waste Resources. – For calendar year 2014 and for each calendar year thereafter, at least 360,000 megawatt hours of the total electric power sold to retail electric customers in the State or an equivalent amount of energy shall be supplied, or contracted for supply in each year, by poultry waste combined with wood shavings, straw, rice hulls, or other bedding material. The electric power suppliers, in the aggregate, shall comply with the requirements of this subsection according to the following schedule:
	Requirement for Poultry
Calendar Year	Waste Resources
2012	68,000 megawatt hours
2013	280,000 megawatt hours
2014 and thereafter	360,000 megawatt hours
…."

Part vi. Repeal property tax exclusion for solar energy electric systems
SECTION 6.(a)  G.S. 105‑275(45) is repealed.
SECTION 6.(b)  This section is effective for taxable years beginning on or after July 1, 2017.

part Vii. cost recovery hold harmless
SECTION 7.  The reasonable and prudent incremental costs incurred by an electric power supplier prior to July 1, 2017, to comply with any requirement repealed or amended by this act may be recovered as provided in G.S. 62‑133.8(h), as amended by this act. In determining cost recovery of incremental costs incurred prior to July 1, 2017, the Utilities Commission shall consider whether reasonable steps were taken to mitigate costs in response to the changes enacted in this act. For the purposes of cost recovery under this act, costs incurred prior to July 1, 2017, include all of the following:
(1)	Costs under purchase contracts for renewable energy entered into prior to July 1, 2017, for the purpose of complying with REPS requirements repealed or amended by this act.
(2)	The costs of renewable energy facilities built by a public utility for which a certificate of public convenience and necessity has been issued by the Commission prior to July 1, 2017, for the purpose of complying with REPS requirements repealed or amended by this act.
(3)	Other costs the Utilities Commission determines are reasonable and prudent costs incurred prior to July 1, 2017, to comply with the REPS requirements repealed or amended by this act.

part VIII. to provide a comprehensive study of the costs and benefits of distributed generation
SECTION 8.(a)  No later than May 1, 2018, the Utilities Commission, in consultation with the Public Staff and the Department of Environmental Quality, shall provide to the Joint Legislative Commission on Energy Policy a comprehensive assessment of known and measurable costs and benefits to the electrical grid of distributed generation, including the comprehensive costs and benefits of net metering from distributed solar generation in this State.
The assessment shall include an analysis of, and recommendations with respect to, the following:
(1)	The impact of current and future nondispatchable distributed generation on the affordability, reliability, resiliency, and safety of North Carolina's electric grid.
(2)	The impact of current and future nondispatchable distributed generation on the overall emission rate of each criteria pollutant per unit of electric power generated in the State.
(3)	Whether changes to existing State law, regulations, policies, and incentives are appropriate considering the cost and operational impacts of current and future nondispatachable resources, including distributed generation, on North Carolina's electric grid.
(4)	Whether standby, generation, transmission, or other charges and credits are necessary to recognize the costs and benefits associated with nondispatchable distributed generation to ensure the protection of North Carolina electric customers from cost shifting or cross‑subsidization.
(5)	The costs and benefits of net metered solar distributed generation to the State, customer‑generators who participate in net metering, customers of a utility who do not participate in net metering, and each utility that offers net metering. The costs and benefits of net metered distributed solar generation considered in the study shall include all of the following to the extent they are known and measurable:
a.	Value of energy at the time and location of generation.
b.	Market price effects on other fuel sources for energy production.
c.	Operational effects on utility delivery systems, generation capacity, transmission capacity, and transmission and distribution line losses.
d.	Environmental impacts of energy production.
e.	Effects on reliability of the electric system.
f.	Any fixed and variable generation, transmission, and distribution costs that the utility recovers from its customers on a volumetric basis.
g.	Any other relevant issues the Utilities Commission believes are appropriate.
(6)	Whether a fixed charge should be assessed in rates of customer‑generators who participate in net metering to ensure such customers pay their portion of utility system fixed costs and the amount of the fixed charge.
SECTION 8.(b)  Each public utility, electric membership corporation, and municipality that distributes electricity in this State shall to the fullest extent possible cooperate with the Utilities Commission and furnish the Utilities Commission with any information it requests in the course of completing the assessment provided for in this act.
SECTION 8.(c)  There is appropriated from the General Fund to the Utilities Commission three hundred thousand dollars ($300,000) for the 2017‑2018 fiscal year to contract with an independent research organization to conduct the assessment required by this section.

part ix. decommissioning requirements for utility‑scale solar projects
SECTION 9.(a)  Article 17 of Chapter 62 of the General Statutes is amended by adding a new section to read:
"§ 62‑351.  Decommissioning and reclamation of utility‑scale solar projects; financial assurance requirements.
(a)	The owner or operator of a utility‑scale solar project shall be responsible for proper decommissioning of the project upon cessation of activities, and reclamation of the property to its condition prior to commencement of activities on the site, no later than two years following completion of the operations.
(b)	Prior to commencement of construction of a utility‑scale solar project, the owner or operator of the project shall establish financial assurance in an amount acceptable to the Department of Environmental Quality that will ensure that sufficient funds are available for decommissioning of the facility and reclamation of the property to its condition prior to commencement of activities on the site, even if the owner or operator becomes insolvent or ceases to reside, be incorporated, do business, or maintain assets in the State. To establish sufficient availability of funds under this section, the owner or operator of a utility‑scale solar project may use insurance, financial tests, third‑party guarantees by persons who can pass the financial test, guarantees by corporate parents who can pass the financial test, irrevocable letters of credit, trusts, surety bonds, or any other financial device, or any combination of the foregoing, shown to provide protection equivalent to the financial protection that would be provided by insurance if insurance were the only mechanism used.
(c)	For purposes of this section, the term "utility‑scale solar project" means a ground‑mounted photovoltaic (PV), concentrating photovoltaic (CPV), or concentrating solar power (CSP or solar thermal) project capable of generating one megawatt (MW) directly connected to the electrical grid for sale to wholesale customers. The term includes the solar arrays, accessory buildings, transmission facilities, and any other infrastructure necessary for the operation of the project.
(d)	The Department of Environmental Quality shall adopt rules establishing criteria to set the amount of financial assurance required for utility‑scale solar projects, which rules shall consider, at a minimum, the solar technology to be employed, i.e., PV, CPV, or CSP; the approximate number and size of solar panels included in the solar arrays to be constructed; any ancillary facilities to be constructed in association with the project; the condition of the property prior to construction of a utility‑scale solar project; the amount of acreage that would be impacted by the proposed project; and any other factors designed to enable establishment of adequate financial assurance for decommissioning and reclamation on a site‑by‑site basis."
SECTION 9.(b)  This section is effective when it becomes law and applies to utility‑scale solar projects for which construction is initiated on or after that date.

pART X. SEVERABILITY clause and effective date
SECTION 10.(a)  If any provision of this act or its application is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provisions or application, and, to this end, the provisions of this act are severable.
SECTION 10.(b)  Unless otherwise provided, this act is effective when it becomes law.