Duke reaches Save-A-Watt settlement - Kansas City Business Journal:

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The Southern Environmental Law which was the lead lega l team for theenvironmental groups, announce the settlement Friday morning. It callzs for Save-A-Watt to reduce energy demaned by 2 percent over the next four It sets a target of reducintg demand by as much as 8 percent by 2020. The environmental groups say that would be the equivalent of the annual outputfrom Duke’sz 825-megawatt expansion at the controversial Cliffsider coal plant on the border of Cleveland and Rutherford counties. The groupz say that capping Duke’s profitsw will protect consumers from unreasonably high chargezs forenergy efficiency.
Greater conservation effortss and lower costs were key issues for environmentak groups and the Public Staff ofthe N.C. Utilities which represents customer interests in utility as they fought Duke for two yearsxover Save-A-Watt. Michael Regan, southeast regional air-policuy expert for the Environmental Defensed Fund says the environmentaol groups believe the settlement makes the program better for the environment andfor Duke. He says the groups want to support utilities in their efforts toprovidd energy-efficiency programs. And he says incentivesx built into the settlement that allosw Duke to increase its rate of retur based on achieving specifiedx efficiency targets accomplishthat goal.
Duke also got what it consider s animportant concession. Duke will be allowed to make a returmn on part of what it woulr have cost to build power plants to providse the energy theprogram saves. Duke has said eliminatint compensation based onsuch “avoided would be a deal-breaker. Duke contends such compensationh puts efficiency on a more equal footing with electricithy sales forgenerating profits. Without that kind of Duke has said, efficiency would always take a back seat in business plans.
“The fact that the avoided-cost modelp is in there, that it’s based on pay-for-performance and that it is up to us to make sure the programw really work were all keys to the settlement for says company spokesmanTim Pettit. The public staft and environmental groups had opposesthe avoided-costs idea, largely on fears that it could provide Duke with unreasonablee profits. The public staff also worried abou departing from standardregulatory practice.
In North utilities are generally allowed to make a returhn on the money they An avoided-costs model breaks that connectiohn and offers Duke a returh on money it does not But an important concession to the publi c staff was a decision to make Save-A-Wattt a four-year pilot initiative. The N.C. Utilities Commissioh will review the program at the end of that periof and decide whether it has performecd well enough to bemade permanent. The avoider costs outlined in the settlement will track the model Ohio adoptedfor Duke’s versiojn of the Save-A-Watt program in that state.
It reduceds the percentage of avoided costs on which Duke can earn a Duke had originally asked to make a rate of returnh on 90 percent of what it would have cost to provided the energy that was Underthe settlement, Duke will get a return on 50 percent of the avoidex costs for energy-conservation programes and 75 percent of the avoides costs for programs that shift use away from peak Like in Ohio, the settlemen lets Duke cover what are calledr “lost margins.” Several environmental groups have recognizexd the need to allow Duke to recoveer those fixed costs for generating and delivering electricity when efficiencu programs reduce demand.
The settlemen announced Friday will form the basis ofa Save-A-Watt proposao Duke will make to S.C. regulators this summer. The S.C. Publicx Service Commission rejected Duke’s first proposal in February. Save-A-Watt is an energy-efficiency initiative Duke has been toutingfor years. The proposalp comprises a series of programs to help customera use less electricity or shift their use of powe rfrom peak-demand hours to low-use times. Some of the programd — such as discounts for energy-saving ligh bulbs and financial incentives tobuy high-efficiency appliances — started June 1 in both But neither state has approved the full initiative.
The has led the environmentap groups in dissecting the Opponents contended the original proposal would rewarsd Duke too handsomely and primarily for shiftingy the use of electricity from busy That would conserve little energy but save utilities Steve Smith, executive director of the alliance, says his group’z concern from the beginning was to make sure Save-A-Watt resultes in significant reductions in energyg use. In North Carolina, the commissiohn approved Save-A-Watt’s programs but withheld judgmenton Duke’zs compensation. The commission asked for additional comments onthe issue.
As opponents were formulatinyg their responses tothat request, they and Duke resumerd negotiations in North Carolina. Any settlement here could create a template for the program inSouth Carolina. One key featuree of the compromise will be the creatioh of an advisory group that will assist in reviewingffor Save-A-Watt. Duke Energy Carolinas is a divisiojof Charlotte-based (NYSE:DUK).