Duke Energy Progress is proposing one of its largest rate cuts in years, as utility customers continue to reap the benefits of falling global energy prices.
If approved by the N.C. Utilities Commission, the overall effect for a typical residential household would be a 2.5 percent decrease.
The rate includes several components – natural gas, coal, solar, energy efficiency and others – and would drop from $111.38 a month to $108.69 a month for a home that uses 1,000 kilowatt hours of electricity.
By far the largest cause of the rate drop is depressed fuel prices, the effect of which dwarfs the small price increases customers will pay for the power company’s expansion of renewables and energy efficiency programs.
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That fuel decrease is the result of falling prices for both coal and for natural gas, plus further energy cost drops in rail and barge expenses to deliver the coal to North Carolina.
“I was pleasantly surprised that the fuel decrease was as much as it was,” said James McLawhorn, who heads the electric division of the Public Staff, the state agency that represents the public in utility rate cases. “I think it’s significant.”
The Progress rate adjustments for fuel and renewables go into effect Dec. 1. The adjustments for energy efficiency and related programs kick in Jan. 1.
Electric utilities in North Carolina are required by state law to adjust their rates annually to account for the fluctuating cost of fuels and certain programs.
Duke Energy Progress, with 1.3 million customers in the state, is the Raleigh-based subsidiary of Charlotte-based Duke Energy.
The proposed rate cut would chip away at a 2013 rate increase that added $7.33 to the monthly bill of a typical residential customer.
The numbers tell a larger story of North Carolina utility industry’s dramatic shift from coal to natural gas, coupled with growth in reneweable energy.
Since 2010, Duke Energy Progress has boosted power generation from natural gas from 6 percent to 26 percent, while reducing its reliance on coal form 46 percent to 24 percent.
Under a 2007 law, utilities here are required to generate 6 percent of their total power from renewables and efficiency programs.
The law requires utilities to increase their reliance on renewables – predominantly solar farms in this state – to 12.5 percent by 2021, but a proposal in the state legislature would freeze the mandate at 6 percent.
With regard to renewables, North Carolina households are currently paying 83 cents a month, or $9.96 a year, for solar farms and other projects.
The proposal would boost the fee to $1.17 a month, or $14.04 a year.
The 2007 energy policy law capped the renewables cost households pay each year to $12 in 2014, but raises the cap to $34 this year.
Burning less coal
McLawhorn said the way the cap is structured, households will pay an increasing share of renewables costs, while businesses and industries will pay a lower share over time, hence the need for the higher cap for households this year.
In its filing with the Utilities Commission, Progress said its coal costs have dropped by 0.6 percent year over year and are projected to decrease 13.5 percent in 2016.
The company burned 6.7 billion tons of coal in the past year, 24 percent less than the 8.9 billion tons originally planned for.
Natural gas use surged 13.2 percent in the past year at a time that Progress paid 2.4 percent less for the gas, per unit.