Electric companies will have to pay if they promote extra use

State slaps rule on energy use

Staff WriterJuly 20, 2010 

— In what may be one of the few policies of its kind in the country, Progress Energy and Duke Energy could have to return money they make if they promote programs that cause customers to increase electricity use.

The two utilities will have to identify and track all promotions and activities that cause customers to increase power consumption. And they will have to submit the information each year to the N.C. Utilities Commission to calculate how much money the companies are not entitled to keep.

The commission imposed the requirement this month on Charlotte-based Duke, rejecting the power company's appeal. The commission, which oversees utility rates and service in the state, adopted a similar standard for Raleigh-based Progress last year.

The commission didn't spell out what kinds of promotions might be covered by the ruling. Regulators and utility officials will meet to hash out the details in the next two months.

The concept is "uncharted territory," said Chris Jacobi, Duke's director of business development and market intelligence. "There are many layers of complexity that we'll have to work out."

One likely point of contention: plug-in electric cars. Both Duke and Progress are collaborating with the auto industry, local officials and universities to develop a statewide recharging network that would make electric cars a workable alternative for the public.

As part of that effort, about 350 recharging stations will be installed in the state in the coming year, largely financed by the federal stimulus. Progress and Duke are installing most of the recharging stations in their service areas.

Electric cars need as much power to recharge batteries as a central air conditioner and represent a major source of revenue for the companies.

Public interest groups supported the new policy out of concern that utilities would try to boost electricity sales to compensate for the revenue losses they will experience from energy-efficiency programs.

"We wanted them to avoid programs that involve wasting energy," said Jim Warren, executive director of N.C. Waste Awareness and Reduction Network, a Durham organization that was involved in the case.

Power companies can recoup the costs of efficiency programs - such as lost sales, financial incentives and administrative costs - by increasing rates. The utilities commission said power companies shouldn't be allowed to recoup costs twice: through rate increases and by increasing sales.

Progress did not oppose the policy, and spokesman Mike Hughes said the rules are not expected to have a big impact on the company's operations.

It's not clear whether other states have similar policies, but officials at the Public Staff, which is North Carolina's consumer advocacy agency in utility matters, and at the National Regulatory Research Institute in Maryland said they were not aware of any taking a similar approach.

General increases in electricity demand, such as digital-TV purchases that are not prompted by a power company promotion, are not subject to the new policy.

In the car market

Plug-in electric cars, which will become commercially available later this year, are almost certain to prove contentious.

The Public Staff contends that utility involvement in developing the electric car market is designed to change customer behavior in a significant way.

"That program would probably increase demand in electricity," said Kendrick Fentress, a staff attorney for the Public Staff.

Duke says nothing a power company can do would influence a customer to make an investment on the scale of an automobile.

Jacobi said utility involvement will be limited to coordinating electric recharging stations, which are essentially power outlets on timers, with the power grid.

"An electric car, which can cost $40,000 or more even after rebates, is not something a utility could ultimately influence," Jacobi said.

john.murawski@newsobserver.com or 919-829-8932

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