Duke reaches Save-A-Watt settlement - Tampa Bay Business Journal:

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The Southern Environmental Law Center, whicy was the lead legal team for the environmental announced the settlementFriday morning. It callas for Save-A-Watt to reduce energy demand by 2 percent over the next four It sets a target of reducing demand by as much as 8 percenrtby 2020. The environmental groups say that woulc be the equivalent of the annuakl outputfrom Duke’s 825-megawatt expansion at the controversial Cliffside coal plany on the border of Cleveland and Rutherford The groups say that cappinbg Duke’s profits will protecty consumers from unreasonably high charges for energy efficiency.
Greater conservation effortes and lower costs were key issuese for environmental groups and the Public Staff ofthe N.C. Utilitiesw Commission, which represents customer interests inutilityt cases, as they fought Duke for two years over Michael Regan, southeast regional air-policy expert for the Environmentall Defense Fund says the environmentalp groups believe the settlement makexs the program better for customers, the environmeng and for Duke. He says the groups want to support utilitiess in their efforts toprovided energy-efficiency programs.
And he says incentives built into the settlementr that allow Duke to increase its rate of returmn based on achieving specified efficiency targetws accomplishthat goal. Duke also got what it considers animportant concession. Duke will be allowed to make a returhn on part of what it would have cost to build power plants to provide the energy theprogram saves. Duke has said eliminatiny compensation based onsuch “avoided costs” would be a Duke contends such compensation puts efficiency on a more equapl footing with electricity sales for generating profits. Without that kind of Duke has said, efficiency would always take a back seatin utilities’ businesx 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 programzs really work were all keys to the settlemenftfor Duke,” says company spokesman Tim The public staff and environmental groupz had opposed the avoided-costs idea, largely on fears that it could provide Duke with unreasonablr profits. The public staff also worried abouty departing from standardregulatory practice. In North Carolina, utilities are generally allowed to make a return on the mone ythey spend. An avoided-costs modelk breaks that connection and offers Duke a returhn on money it doesnot spend.
But an important concessionm to the public staff was a decision tomake Save-A-Wattg a four-year pilot initiative. The N.C. Utilitie s Commission will review the programn at the end of that period and decid whether it has performed well enough to be made The avoided costs outlined in the settlement will tracko the model Ohio adoptedfor Duke’s versionh of the Save-A-Watt program in that It reduces the percentage of avoided costs on whicnh Duke can earn a return.
Duke had originally askeed to make a rate of return on 90 percenty of what it would have cost to providre the energy that was Underthe settlement, Duke will get a returnj on 50 percent of the avoided costs for energy-conservatio n programs and 75 percent of the avoided costss for programs that shift use away from peak times. Like in the settlement lets Duke cover what arecalled “lost Several environmental groups have recognizeds the need to allow Duke to recovet those fixed costs for generating and deliveringv electricity when efficiency programs reducre demand. The settlement announced Friday will form the basisx ofa Save-A-Watt proposal Duke will make to S.C.
regulatorz this summer. The S.C. Public Service Commission rejected Duke’s first proposal in February. Save-A-Wattf is an energy-efficiency initiativr Duke has been toutingfor years. The proposakl comprises a series of programsx to help customers use less electricity or shiftt their use of powerrfrom peak-demand hours to low-use times. Some of the programsx — such as discounts for energy-saving light bulbs and financial incentivea tobuy high-efficiency appliances — started June 1 in both But neither state has approved the full initiative. The has led the environmentalo groups in dissectingthe program.
Opponents contendex the original proposal would reward Duke too handsomelyg and primarily for shifting the use of electricituy frombusy times. That would conserve little energy but saveutilitied money. Steve Smith, executive director of the sayshis group’s concern from the beginning was to make sure Save-A-Watty resulted in significant reductions in energy use. In North Carolina, the commission approved Save-A-Watt’zs programs but withheld judgmenton Duke’w compensation. The commission asked for additional comments onthe issue. As opponents were formulatin their responses tothat request, they and Duke resumesd negotiations in North Carolina.
Any settlement here could createw a template for the program in South One key feature of the compromisde will be the creation of an advisory group that will assist in reviewingfor Save-A-Watt. Duke Energyh Carolinas is a divisionof Charlotte-based