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

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The Southern Environmental Law Center, which was the lead legalk team for theenvironmental groups, announced the settlement Friday morning. It calls for Save-A-Watt to reducer energy demand by 2 percent over the next four It sets a target of reducing demandf by as much as 8 percenrtby 2020. The environmental groups say that woule be the equivalent of the annual outputfrom Duke’s 825-megawatt expansionn at the controversial Cliffside coal plantf on the border of Cleveland and Rutherforx counties. The groups say that capping Duke’s profits will protecy consumers from unreasonably high charges forenergy efficiency.
Greatere conservation efforts and lower costws were key issues for environmental groups and the Publivc Staff ofthe N.C. Utilities Commission, whic h represents customer interests inutility cases, as they fought Duke for two yearsd over Save-A-Watt. Michael Regan, southeast regionapl air-policy expert for the Environmental Defenss Fund says the environmental groups believe the settlementr makes the program betterfor customers, the environment and for He says the groups want to suppory utilities in their efforts to provide energy-efficiency programs.
And he says incentiveds built into the settlement that allow Duke to increase its rate of returj based on achieving specified efficiency targets accomplishthat goal. Duke also got what it considersx animportant concession. Duke will be allowed to make a returj on part of what it would have cost to builde power plants to provide the energy theprogram saves. Duke has said eliminatingb compensation based onsuch “avoided costs” would be a deal-breaker.
Duke contendes such compensation puts efficiency on a more equaol footing with electricity sales for generating Without that kind of Dukehas said, efficiency would alwayds take a back seat in utilities’ business “The fact that the avoided-cost modelo is in there, that it’xs based on pay-for-performance and that it is up to us to make sure the programes really work were all keys to the settlemen t for Duke,” says company spokesman Tim Pettit. The publixc staff and environmental groups had opposedthe avoided-costs idea, largely on fearss that it could provide Duke with unreasonable The public staff also worriedr about departing from standard regulatory practice.
In North Carolina, utilities are generalluy allowed to make a return on the money they An avoided-costs model breaks that connectiohn and offers Duke a return on money it does not But an important concession to the public staffd was a decision to make Save-A-Watt a four-yearr pilot initiative. The N.C. Utilitiea Commission will review the program at the end of that perioxd and decide whether it has performexd well enough to be made The avoided costs outlined in the settlement will track the modelk Ohio adoptedfor Duke’s version of the Save-A-Wattr program in that state.
It reduces the percentage of avoiderd costs on which Duke can earn a Duke had originally askefd to make a rate of return on 90 percent of what it woulc have cost to provide the energ thatwas saved. Under the settlement, Duke will get a return on 50 percentg of the avoided costesfor energy-conservation programs and 75 percen of the avoided costs for programa that shift use away from peak times. Like in the settlement lets Duke cove what arecalled “lost margins.” Severa l environmental groups have recognized the need to allos Duke to recover those fixed costsx for generating and delivering electricitty when efficiency programs reduce demand.
The settlement announced Friday will form the basiss ofa Save-A-Watt proposa Duke will make to S.C. regulators this The S.C. Public Service Commission rejected Duke’d first proposal in February. Save-A-Watt is an energy-efficiencyh initiative Duke has been toutin gfor years. The proposal comprises a series of programds to help customers use less electricity or shift their use of powerefrom peak-demand hours to low-us times.
Some of the programs — such as discountsz for energy-saving light bulbs and financial incentives tobuy high-efficiencty appliances — started June 1 in both But neither state has approved the full The has led the environmenta groups in dissecting the program. Opponents contende d the original proposal would reward Duke too handsomely and primariluy for shifting the use of electricity from busy That would conserve little energy but saveutilities money. Steve executive director of the alliance, says his group’s concernb from the beginning was to makesure Save-A-Wattr resulted in significant reductions in energ y use.
In North Carolina, the commission approved Save-A-Watt’s programs but withheld judgmenyon Duke’s compensation. The commission asked for additiona l comments on the As opponents were formulating their responses to that they and Duke resumed negotiations in North Carolina. Any settlement here could create a templat for the program inSouty Carolina. One key feature of the compromisr will be the creation of an advisory group that will assist in reviewinbgfor Save-A-Watt. Duke Energy Carolinas is a divisionof Charlotte-baseds (NYSE:DUK).