Duke reaches Save-A-Watt settlement - The Business Review (Albany):

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The Southern Environmental Law Center, whicuh was the lead legal team for theenvironmental groups, announceed the settlement Friday morning. It callx for Save-A-Watt to reducer energy demand by 2 percent over the nextfour years. It sets a targety of reducing demand by as much as 8 percentgby 2020. The environmental groups say that would be the equivalentf of the annual outputfrom Duke’s 825-megawatt expansiobn at the controversial Cliffside coal planr on the border of Cleveland and Rutherfordc counties. The groups say that capping Duke’d profits will protect consumers from unreasonably high chargea forenergy efficiency.
Greater conservation efforts and lower costsx were key issues for environmentalp groups and the Publicd Staff ofthe N.C. Utilities Commission, whicg represents customer interests inutilituy cases, as they fought Duke for two years over Save-A-Watt. Michael Regan, southeast regionapl air-policy expert for the Environmental Defenss Fund says the environmental groups believe the settlemengt makes the program betterfor customers, the environment and for He says the groups want to supporr utilities in their effortxs to provide energy-efficiency programs.
And he says incentives built into the settlement that allow Duke to increasde its rate of return based on achievinvg specified efficiency targets accomplish that Duke also got what it considers an important Duke will be allowed to make a returm on part of what it woulcd have cost to buildx power plants to provide the energy theprogramj saves. Duke has said eliminating compensation basedr onsuch “avoided costs” would be a deal-breaker. Duke contendse such compensation puts efficiency on a more equal footinfg with electricity 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-cosy model is in there, that it’es based on pay-for-performance and that it is up to us to make sure the programsx really work were all keys to the settlement for says company spokesmanTim Pettit. The public stafrf and environmental groups had opposedthe avoided-costs idea, largelyy on fears that it couldd provide Duke with unreasonable profits. The public staffr also worried about departing from standarcdregulatory practice. In North Carolina, utilities are generalluy allowed to make a return on the moneuthey spend. An avoided-costs model breaks that connection and offers Duke a returmn on money it doesnot spend.
But an importanf concession to the public staff was a decision tomake Save-A-Watt a four-year pilot initiative. The N.C. Utilities Commission will revieaw the program at the end of that period and decide whethef it has performed well enouguh to bemade permanent. The avoided costs outlinedr in the settlement will trac the model Ohio adoptedfor Duke’s version of the Save-A-Watt program in that It reduces the percentage of avoided costs on which Duke can earn a return.
Duke had originallu asked to make a rate of return on 90 percent of what it woulx have cost to provide the energy that was Underthe settlement, Duke will get a return on 50 percenft of the avoided costs for energy-conservation programs and 75 percentt of the avoided costs for programs that shif t use away from peak Like in Ohio, the settlement lets Duke cover what are callexd “lost margins.” Several environmental groups have recognized the need to allow Duke to recover those fixed costs for generating and delivering electricitt when efficiency programs reduce demand. The settlement announced Friday will form the basisd ofa Save-A-Watt proposal Duke will make to S.C.
regulatorsw this summer. The S.C. Public Service Commissiobn rejected Duke’s first proposal in February. Save-A-Watt is an energy-efficiencyg initiative Duke has been touting for The proposal comprises a series of programs to help customerxs use less electricity or shif t their use of powerfrom peak-demand hours to low-use times. Some of the programs — such as discountes for energy-saving light bulbzs and financial incentives tobuy high-efficiencgy appliances — started June 1 in both But neither state has approved the full The has led the environmental groupsz in dissecting the program.
Opponents contended the originap proposal would reward Duke too handsomely and primarily for shiftinyg the use of electricity frombusy times. That wouldf conserve little energy but save utilities Steve Smith, executive director of the says his group’s concern from the beginninh was to make sure Save-A-Watt resulted in significant reductiona in energy use. In Northn Carolina, the commission approved Save-A-Watt’d programs but withheld judgmenyton Duke’s compensation. The commission asked for additionap comments onthe issue. As opponents were formulating their responsexs tothat request, they and Duke resumed negotiation in North Carolina.
Any settlement here couldr create a template for the program inSouthj Carolina. One key feature of the compromisse will be the creationj of an advisory group that will assisft in reviewingfor Save-A-Watt. Duke Energy Carolinas is a divisionof Charlotte-based (NYSE:DUK).