Utility's plan: Cut energy use

Duke Energy's strategy will ask customers to use less electricity

In a dramatic about-face on energy conservation, Duke Energy is planning to introduce a proposal next month to cut regional power use on a scale that is equivalent to shutting down a major power plant.

Chief executive James Rogers described the program Friday as one of the most ambitious in the nation, saying it is the result of months of meetings with environmentalist groups.

In an industry in which utilities are rewarded for boosting sales, the efficiency program would be an anomaly, proposing to pay Duke for selling less of its product.

Environmentalist groups have long contended that conservation could play a bigger role in meeting the state's energy needs. These groups are now capitalizing on the increasing public focus on energy and environmental issues. In February, they persuaded state regulators to quash Duke's bid to build two coal-burning power plants near Charlotte. The state Utilities Commission approved only one of the plants that the company said it needed.

Environmentalists vowed to fight Duke's attempt to build the permitted power plant unless the company first tried energy efficiency.

Now Duke hopes to replace the disallowed 800-megawatt power plant with an equivalent amount of energy efficiency, a goal that it derided as pie-in-the-sky several months ago.

"Our best bet today is we can get 800 megawatts over a four-year period," Rogers said Friday in a meeting with News & Observer reporters and editors. "We're optimistic about our capability to do that."

The plan would give Duke the authority to briefly shut off participating customers' air conditioners and refrigerators, by remotely signaling computer chips implanted in appliances and thermostats. The company would conduct home energy audits and offer discounts to customers who buy fluorescent light bulbs.

The program is designed to work as the default electric service for all of Duke's customers, except those who opt out. Duke is the largest electricity provider in the state.

"If we can cycle off a refrigerator for 10 minutes in 4 million homes, that's real savings," Duke spokesman Tom Williams said.

Duke plans to present the efficiency proposal to the state Utilities Commission within two weeks, Rogers said.

Duke has committed to spending at least 1 percent of its revenue in the Carolinas -- about $35 million a year in North Carolina -- on efficiency programs.

Key to the program's acceptance is allowing Duke to profit from efficiency. Duke's electricity rates are based on its investment in power plants and other infrastructure: The company makes money by selling electricity. In an efficiency program, the rates would be adjusted based on the utility's investment in efficiency. The profit would be based, not on sales, but on avoided sales.

North Carolina law allows utilities to recover their investment in efficiency programs, but there is no provision to profit from electricity that is not sold. Such a provision is pending in the General Assembly in a bill to promote renewable energy and efficiency.

In the past, efficiency was not cost effective because of the state's low energy rates.

But as Duke and Progress Energy prepare to build the first multibillion-dollar power plants in two decades, efficiency becomes more attractive.

At the utilities commission, Duke's proposal will be scrutinized for evidence that the financial incentive is not excessive.

"We want to make sure they're not getting too high a rate of return, that they're not gouging the ratepayer," said Michael Shore, a senior air policy analyst at N.C. Environmental Defense who has worked with Duke on the program.

"We want Duke Energy to make more profit from their energy-efficiency investment than they make investing in new coal or nuclear generation," Shore said. "This is a first step, and if successful, then it opens the door for Duke to take a giant leap forward on energy efficiency."