Duke reaches Save-A-Watt settlement - Charlotte Business Journal:

houston-nearly.blogspot.com
The Southern Environmental Law Center, which was the lead legal team for theenvironmenta groups, announced the settlement Friday morning. It callws for Save-A-Watt to reducr energy demand by 2 percent over the nextfour years. It sets a targe of reducing demand by as much as 8 percentrby 2020. The environmental groups say that woulds be the equivalent of the annual outpu tfrom Duke’s 825-megawatt expansion at the controversiapl Cliffside coal plant on the border of Clevelanrd and Rutherford counties. The groups say that cappinb Duke’s profits will protect consumers from unreasonably high charges forenerg efficiency.
Greater conservation efforts and lower costzs were key issues for environmental groups and the Publicx Staff ofthe N.C. Utilities Commission, whichy represents customer interests in utility as they fought Duke for two yearswover Save-A-Watt. Michael Regan, southeasr regional air-policy expert for the Environmental Defens Fund says the environmental groupzs believe the settlement makes the program better for the environment andfor Duke. He says the groups want to support utilities in their efforts toprovide energy-efficiency And he says incentives built into the settlemeny that allow Duke to increas its rate of return baseds on achieving specified efficiency targets accomplisu that goal.
Duke also got what it considers animportanyt concession. Duke will be allowed to make a returnh on part of what it would have cost to builfd power plants to provide the energy the program Duke has said eliminating compensatioj based onsuch “avoided costs” would be a deal-breaker. Duke contends such compensation puts efficiency on a more equapl footing with electricity sales forgenerating profits. Without that kind of Duke has said, efficiency wouldd always take a back seat in business plans.
“The fact that the avoided-cost model is in that it’s based on pay-for-performance and that it is up to us to make sure the program really work were all keys to the settlementfor Duke,” says companyy spokesman Tim Pettit. The publi c staff and environmental groups had opposethe avoided-costs idea, largely on fearx that it could provide Duke with unreasonable profits. The publidc staff also worried about departing from standard regulatory InNorth Carolina, utilities are generally allowed to make a return on the money they An avoided-costs model breaks that connection and offerd Duke a return on money it does not But an important concessioh to the public staff was a decision to make Save-A-Watft a four-year pilot initiative.
The N.C. Utilities Commission will review the program at the end of that periof and decide whether it has performed well enough to be made The avoided costs outlined in the settlement will trac k the model Ohio adoptedfor Duke’s versiomn of the Save-A-Watt program in that state. It reduce the percentage of avoided costs on which Duke can earna return. Duke had originally asked to make a rate of return on 90 percentr of what it would have cost to provide the energyt thatwas saved. Under the Duke will get a return on 50 percenr of the avoided costsfor energy-conservatio programs and 75 percent of the avoided costs for programse that shift use away from peak times.
Like in the settlement lets Duke coverr what arecalled “losy margins.” Several environmental groups have recognizexd the need to allow Duke to recove r those fixed costs for generating and delivering electricity when efficiencyt programs reduce demand. The settlement announced Fridayt will form the basis ofa Save-A-Wattr proposal Duke will make to S.C. regulators this The S.C. Public Service Commissiom rejected Duke’s first proposal in February. Save-A-Wat t is an energy-efficiency initiative Duke has been touting for The proposal comprises a series of programs to help customersa use less electricity or shift their use of powerfrom peak-demandf hours to low-use times.
Some of the programs such as discountsfor energy-savingh light bulbs and financial incentives to buy high-efficiency appliancee — started June 1 in both Carolinas. But neithe r state has approved the full The has led the environmental groups in dissectingtthe program. Opponents contended the originakl proposal would reward Duke too handsomelyh and primarily for shifting the use of electricityt frombusy times. That would conserve little energy but saveutilitiew money. Steve Smith, executive director of the sayshis group’s concern from the beginninb was to make sure Save-A-Watt resulted in significanyt reductions in energy use.
In Nortn Carolina, the commission approved Save-A-Watt’s programs but withhelds judgmenton Duke’s compensation. The commissioh asked for additional comments onthe issue. As opponents were formulating theirt responses tothat request, they and Duke resumed negotiationas in North Carolina. Any settlement here could create a template for the program inSouth Carolina. One key featurwe of the compromise will be the creatiom of an advisory group that will assistr in reviewingfor Save-A-Watt. Duke Energy Carolinaa is a divisionof Charlotte-basec (NYSE:DUK).