Many oppose Duke Energy efficiency plan

The company's proposed Save-A-Watt program is criticized as exorbitant and ineffective

Church groups, consumer advocates and environmentalists are lining up against Duke Energy's energy-efficiency program as the controversial proposal nears public hearings later his month.

The critics say Duke Energy's Save-a-Watt proposal would gouge the public, enrich shareholders and result in minimal energy efficiency. The Public Staff, the state's consumer advocacy agency, warns that if Save-a-Watt were approved, a customer would end up paying $18.23 for a compact fluorescent light bulb that's available at Wal-Mart for $1.65.

The costs to customers "are two to three times the costs of similar programs to ratepayers in other states," said Public Staff expert Richard Spellman in filed testimony. "As such, the SAW approach is a bad deal for Duke ratepayers."

Save-a-Watt has been touted by Duke chief executive James Rogers as a revolutionary concept that will create a powerful incentive to save energy. Traditional efficiency programs create little financial incentive for utilities to push conservation. But through Save-a-Watt, Duke would turn energy efficiency into a corporate profit center.

"Save-a-Watt is a radical departure from past programs, and may not be embraced by all parties," said Duke spokesman Andy Thompson. "Previous energy efficiency programs have not demonstrated that they can achieve the savings we need in the future."

The proposal is headed for a July 28 hearing before the N.C. Utilities Commission. The commission is expected to rule on Save-a-Watt this year.

Earlier this year, South Carolina regulators approved a version of Save-a-Watt.

But in this state, Save-a-Watt is opposed by a wide range of interests: five environmental organizations, industrial energy users, Wal-Mart, AARP, the city of Durham, the N.C. Council of Churches and the Public Staff, among others. The critics say Duke's proposal is not only exorbitant, but it won't result in significant energy savings.

"Duke is projecting that it will take the company 7 1/2 years, until December 2015, to save 1 percent of annual [electricity] sales, an amount that the top twenty electric utilities achieved in just one year," Spellman, president of GDS Associates, an engineering consulting firm, said in his submitted testimony.

Duke has proposed Save-a-Watt in response to a new state law that requires utilities to meet customer energy demand through renewable resources and efficiency programs. The costs of those programs will be paid by the utility's customers through monthly bills.

Conservation programs require administration, monitoring, new technologies and financial incentives to encourage customers to upgrade appliances and home design. And the utilities are reimbursed for lost sales.

Typically, utilities are allowed to make a modest profit on conservation programs. Duke's proposal would entitle the company to a margin of about 50 percent on top of the company's costs to run the program. That would represent a huge premium, about seven times what the company makes from operating its business, according to Public Staff calculations. The company's net return is only about 7.5 percent, and the Public Staff is recommending that Duke be allowed a margin of no more than 6.8 percent from Save-a-Watt.

Thompson said Duke would rebut the critics in a July 21 filing to the utilities commission.

"Under the model, we only get rewarded for achieving verifiable energy savings," he said. "This helps ensure that we will pursue innovative energy efficiency programs that will achieve significant savings that ... will help defer the need for additional power plants."

Duke is building a coal-burning power plant in the Blue Ridge foothills and proposing two new nuclear reactors.

Save-a-Watt programs include energy assessments, efficiency kits containing compact flouroscent light bulbs, subsidies for geothermal heat pumps and other energy-efficient equipment, and weatherstripping for low-income households. Duke will introduce other measures over time.

The Public Staff said some aspects of Save-a-Watt are repackaged versions of programs Duke has offered for years, and shouldn't be counted.

The Public Staff also contends that Save-a-Watt provides little customer incentive to adopt efficiency. The agency's calculations show that the rate increase required to finance Save-a-Watt would mean that that it would take five years of energy savings to pay for the cost of a compact flouroscent light bulb. Without Save-a-Watt, such a bulb pays for itself in about six months.

The nation's top energy-efficiency programs programs cut electricity use by about 1 percent a year, the Public Staff noted. That's far more than the 0.15 percent annual reduction Duke proposes from 2009 through 2012.