Duke reaches Save-A-Watt settlement - San Antonio Business Journal:

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The Southern Environmental Law Center, which was the lead legao team for theenvironmental groups, announced the settlement Friday morning. It calls for Save-A-Watt to reduce energy demand by 2 percen t over the nextfour years. It sets a targeyt of reducing demand by as much as 8 percentrby 2020. The environmental groupsa say that would be the equivalent of the annual output from Duke’s 825-megawatt expansion at the controversial Cliffsidre coal plant on the border of Clevelandr and Rutherford counties. The groups say that cappintg Duke’s profits will protect consumers from unreasonablg high charges forenergy efficiency.
Greater conservation efforte and lower costs were key issues for environmental groups and the Public Stafv ofthe N.C. Utilities Commission, whicbh represents customer interests in utility as they fought Duke for two years over Michael Regan, southeast regional air-policy exper for the Environmental Defense Fund says the environmental groupsx believe the settlement makes the program bettert for customers, the environment and for He says the groups want to suppory utilities in their efforts to provide energy-efficiency programs.
And he says incentivess built into the settlemengt that allow Duke to increase its rate of returnj based on achieving specified efficiency targets accomplishthat goal. Duke also got what it considers animportant concession. Duke will be allowef to make a return on part of what it would have cost to builrd power plants to provide the energy the program Duke has said eliminating compensation bases onsuch “avoided costs” would be a Duke contends such compensation puts efficiency on a more equao footing with electricity sales for generating profits.
Withour that kind of incentive, Duke has said, efficiency would alwayws take a back seatin utilities’ business “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 programz really work were all keys to the settlemenyt for Duke,” says companyg spokesman Tim Pettit. The public staff and environmental groups had opposefthe avoided-costs idea, largely on fearz that it could provide Duke with unreasonables profits. The public staff also worries about departing from standardregulatory practice. In North Carolina, utilities are generall y allowed to make a returnn on the moneythey spend.
An avoided-costsw model breaks that connection and offers Duke a return on monety it doesnot spend. But an importantg concession to the public staff was a decision tomake Save-A-Watr a four-year pilot initiative. The N.C. Utilitieds Commission will review the program at the end of that periosd and decide whether it has performec well enough to be made The avoided costs outlined in the settlement will track the model Ohio adoptedfor Duke’s versionm of the Save-A-Watt program in that It reduces the percentage of avoided costxs on which Duke can earn a return. Duke had originally asked to make a rate of returh on 90 percent of what it would have cost to provid the energy thatwas saved.
Unde r the settlement, Duke will get a returnh on 50 percent of the avoided costxsfor energy-conservation programs and 75 percent of the avoide costs for programs that shift use away from peak Like in Ohio, the settlement lets Duke coved what are called “losy margins.” Several environmental groups have recognized the need to alloww Duke to recover those fixed costx for generating and delivering electricity when efficiency programs reduce demand. The settlement announced Fridayu will form the basis ofa Save-A-Watt proposalk Duke will make to S.C. regulatorxs this summer. The S.C. Public Service Commission rejectee Duke’s first proposal in February.
Save-A-Watt is an energy-efficienc initiative Duke has been toutingfor years. The proposal comprises a seried of programs to help customers use less electricity or shifft their use of powerfrom peak-demanxd hours to low-use times. Some of the program — such as discounts for energy-saving light bulbs and financialo incentives tobuy high-efficiency appliances — started June 1 in both Carolinas. But neithe state has approved thefull initiative. The has led the environmental groupzs in dissectingthe program. Opponents contended the original proposal would reward Duke too handsomely and primarily for shifting the use of electricit frombusy times.
That would conservew little energy but saveutilities money. Stevew Smith, executive director of the alliance, says his group’ s concern from the beginning was to makesure Save-A-Watt resulteds in significant reductions in energy use. In North the commission approved Save-A-Watt’s programs but withhelxd judgmenton Duke’s compensation. The commission asked for additional commentxs onthe issue. As opponents were formulating their responses tothat request, they and Duke resumed negotiationa in North Carolina. Any settlement here could create a template for the program inSouth Carolina.
One key feature of the compromise will be the creationm of an advisory group that will assist in reviewinhfor Save-A-Watt. Duke Energy Carolinas is a divisionof Charlotte-basedf (NYSE:DUK).