Duke Energy plan puts a price on cutting back

Conservation program has opposition in N.C

CHARLOTTE -- Duke Energy has won over some skeptics in South Carolina on a novel energy efficiency program that would allow the utility to charge customers up to four times as much as utilities typically charge to pay for such programs.

The agreement charts a potential road map for a deal in North Carolina, where a similar energy conservation proposal is pending before state regulators.

But the Charlotte-based utility could have a tougher time getting approval in Raleigh.

Opposition is strong from some consumer groups. They say that the program, called Save-a-watt, would cost North Carolina ratepayers too much and that Duke should share more of the savings with customers.

Progress Energy also is proposing conservation programs this year, but the Raleigh utility hasn't detailed how those programs would be financed. Opponents fear that if Duke's proposal is approved in South Carolina, it would encourage Progress as well as other utilities to attempt to adopt Duke's approach.

The dispute comes down to how much a utility should be paid for getting customers to reduce energy use. All agree that utilities shouldn't lose revenue for succeeding at conservation.

"Our concern is that if this gets approved, other utilities would say, 'We want the candy, too,' " said John Wilson, director of research for the Southern Alliance for Clean Energy in Asheville. "These utility sector fads can take hold and take things in the wrong direction."

The N.C. Utilities Commission this year plans to take up the proposal, which is meant to battle global warming by reducing future air pollution. A date to hear testimony hasn't been set.

In a filing with North Carolina regulators, the Carolinas Utility Customers Association, which represents large industrial power users, called Duke's Save-a-watt pricing proposal a "complete perversion. Duke must not be permitted to extort unjustifiable profits."

Duke has proposed an initial save-a-watt fee of about $15 a year on the average bill. (The average annual bill runs about $1,000.) Even with the added fee, some customers might end up saving 6 percent on their monthly bill because they would be using less electricity, overall. If they don't take advantage of all the programs, such as weatherizing their homes or switching to energy efficiency appliances, their bills could increase by 4 percent, said Ted Schultz, Duke's vice president for energy efficiency.

Controversial pricing

The proposed pricing method is controversial to some because for the first time, it would allow Duke to recoup lost revenue and profit from helping customers use less electricity each month. That's a change from the usual method, which is to charge customers based on the actual costs of running the programs -- a lesser amount.

Save-a-watt would cut power demand through a slate of conservation programs, including using new "smart" meters that could adjust the flow of power to appliances. Duke might also help customers buy the appliances through low-cost financing plans.

Some aspects of the program would be involuntary, such as those that allow Duke to cycle air conditioning on and off during times of peak summer demand to take stress off the system.

About 185,000 customers in the Carolinas already volunteer for a similar program in exchange for an $8 monthly break in the summer. But under Save-a-watt, the installed smart meters would allow the company to enroll everyone automatically. And those who opt out would have to pay extra.

Duke, the S.C. Office of Regulatory Staff and Wal-Mart, among others, came to the compromise in South Carolina last week. The deal would allow Duke to charge customers 85 percent of what it would have cost the company to produce the electricity that it saves through Save-a-watt. Duke had proposed a 90 percent rate, the same as in the N.C. proposal.