Duke Energy Corp., while pushing ahead with plans for a new coal-burning power plant in Cliffside, west of Charlotte, and perhaps additional nuclear reactors to supply its electricity customers, insists it's committed to energy conservation as a "virtual" fuel source for the future.
Several public interest advocacy groups, however, say it isn't.
The two sides squared off this week in Raleigh for the start of hearings before the N.C. Utilities Commission on Duke's proposed Save-A-Watt program, which it calls "a new paradigm" for conservation efforts in the state. Critics say the program, if approved, wouldn't save much energy at all—and Duke would overcharge for it. Under the plan, residential customers could choose whether or not to buy energy-saving devices, but whether they did or not, they'd all pay a monthly surcharge—according to testimony, about $1 a month per household.
Because Duke is a monopoly supplier of electricity for 1.4 million customers in North Carolina, it is regulated by the seven-member commission, which has broad authority to approve, reject or modify Duke's plans.
The commission's regulatory control of conservation programs was strengthened by the General Assembly last year in Senate Bill 3, which directed the electric utilities serving the state—primarily Duke Energy and Progress Energy—to start shifting away from expensive (and polluting) fuel sources like oil and coal toward cheaper, cleaner sources like solar, wind and conservation. SB-3 essentially left it to the commission to decide how conservation programs, in particular, should be organized and how much energy they should be expected to save.
Duke's Save-A-Watt plan is the utility corporations' first shot at taking control of such programs, which might otherwise be run—and which most of the groups arrayed against Duke think should be run—by an independent public benefits fund, as is done in some other states.
Progress Energy's conservation plan, filed recently, will be considered by the commission after it decides Duke's case.
Duke Energy proposes to sell conservation products and services to its customers (including efficient light bulbs, thermostats and insulation) while surcharging each of them at a rate equal to 90 percent of its "avoided cost," meaning the value of the energy savings it achieves.
That's better for customers than charging them 100 percent of the cost of generating the "avoided" power, the company contends.
Duke's lead-off witness, Duke Energy Carolinas President Ellen Ruff, argued this approach would "put the risk on us," since marketing the program would be costly and customers might not buy much of it, in which case the surcharge would amount to 90 percent of very little.
On the other hand, answering critics who say the program isn't ambitious enough, Ruff said Duke intends to make money on it. "We don't know how successful we will be," she said, "[but] we need to be successful."
Exactly how the "avoided costs" will be calculated, and Duke's anticipated costs and profits, aren't entirely clear in the commission's proceedings, since the company has shrouded its financial submissions in confidentiality claims.
Ruff testified that her company is required to spend 1 percent of its revenues on conservation as a condition of the utility commission's approval of the Cliffside plant, an amount equal to upward of $35 million a year in North Carolina. Before she would discuss specific program numbers, however, the commission cleared the room of everyone who hadn't signed a pledge to keep those numbers a secret.
In general terms, however, Duke Energy's critics said the company could earn a rate of return of 50 percent or higher on the money it spends, given how much it intends to charge for its products. Exhibit A, in this regard, is Duke's intended price for a compact fluorescent light bulb, which at $18.23 would be as much as 10 times the retail cost.
Whatever the profits, said Shana Becker, staff attorney for the N.C. Public Interest Research Group (PIRG), the bottom line is that Duke projects total energy savings over four years of just 1 percent, a pitiful number compared to the best energy-conservation programs around the country, which save up to 17 times that much.
Becker cited federal energy data (also included in the staff's filing) showing that the top 20 energy-conservation programs average 11.9 percent savings; they range from a high of 17.7 percent (city of Burlington, Vermont) to a low of 9.2 percent (Wisconsin Power & Light).
Becker said North Carolina's utilities are in the energy-selling business, not the conservation business, and depending on them to do the latter well is like going "to Krispy Kreme for a healthy diet plan."
In addition to N.C. PIRG, Duke's opponents include AARP North Carolina, Clean Water for N.C., NC WARN, the N.C. Council of Churches, the N.C. Justice Center, the Southern Environmental Law Center and Environment North Carolina.
The city of Durham, whose residents are Duke Energy customers, also opposed the company's plan. Senior Assistant City Attorney Sherri Zahn Rosenthal's brief argues Duke's profit model "bears no relation to the actual costs of achieving energy efficiency and energy reduction, which are low compared to generating electricity."
Consequently, Rosenthal maintained, Duke's costs to its customers per kilowatt hour saved would be "among the highest, if not the highest, in the country," minimizing how much energy would be saved but maximizing the company's profits.
Rosenthal said a public benefits fund, operated with funds from a utility surcharge, might do better, or Duke itself could do better if ordered to do so—with appropriate rules—by the utilities commission. She noted California's commission has ordered its utilities to achieve 8.5 percent energy savings by 2013, compared to Duke's goal of 1 percent savings.
The hearings continue this week, then break until Aug. 18, when Duke Energy CEO Jim Rogers is due to testify. N.C. Policy Watch hosts a discussion on the program July 31 at noon at the Marbles Kids Museum.