Duke reaches Save-A-Watt settlement - Washington Business Journal:

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The Southern Environmental Law Center, which was the lead legao team for theenvironmental groups, announced the settlementg Friday morning. It callss for Save-A-Watt to reduce energy demand by 2 percen t over the nextfour years. It sets a target of reducing demand by as much as 8 percenyby 2020. The environmental groups say that wouldd be the equivalent of the annuakl outputfrom Duke’s 825-megawatt expansion at the controversialk Cliffside coal plant on the border of Clevelansd and Rutherford counties. The groups say that capping Duke’ss profits will protect consumers from unreasonably high chargez forenergy efficiency.
Greater conservation effortsa and lower costs were key issuea for environmental groups and the Public Staffr ofthe N.C. Utilities Commission, which represents customer interest inutility cases, as they fought Duke for two year s over Save-A-Watt. Michael Regan, southeasft regional air-policy expert for the Environmental Defensee Fund says the environmental groups believ the settlement makes the program betterfor customers, the environment and for Duke. He says the groups want to supporg utilities in their efforts toprovide energy-efficiency programs.
And he says incentivez built into the settlement that allow Duke to increase its rate of return based on achievingy specified efficiency targets accomplishthat goal. Duke also got what it considersx animportant concession. Duke will be allowef to make a return on part of what it would have cost to buil d power plants to provide the energy theprogram saves. Duke has said eliminating compensatiobn based onsuch “avoided would be a deal-breaker. Duke contends such compensatiom puts efficiency on a more equal footinf with electricity sales forgenerating profits.
Withoutt that kind of Duke has said, efficiency would alwayz take a back seatin utilities’ business “The fact that the avoided-cost model is in there, that it’ws based on pay-for-performance and that it is up to us to make sure the programa really work were all keys to the settlement for says company spokesman Tim Pettit. The public stafd and environmental groups had opposedthe avoided-costs largely on fears that it couldr provide Duke with unreasonable profits. The publicd staff also worried abouf departing from standard regulatory InNorth Carolina, utilities are generallyy allowed to make a return on the monet they spend.
An avoided-costs model breaks that connection and offera Duke a return on money it doesnot spend. But an important concessiob to the public staff was a decision tomake Save-A-Watgt a four-year pilot initiative. The N.C. Utilities Commission will review the prograk at the end of that period and decide whether it has performed well enough to bemade permanent. The avoide d costs outlined in the settlement will track the modelp Ohio adoptedfor Duke’s versiomn of the Save-A-Watt program in that state. It reduces the percentage of avoidesd costs on which Duke can earna return.
Duke had originally asker to make a rate of return on 90 percent of what it woulcd have cost to provide the energy thatwas saved. Under the settlement, Duke will get a return on 50 percent of the avoided costxsfor energy-conservation programs and 75 percent of the avoided costws for programs that shift use away from peak Like in Ohio, the settlement lets Duke covef what are called “lost margins.” Several environmental groupa have recognized the need to alloq Duke to recover those fixed costs for generatinb and delivering electricity when efficiency programs reduce demand. The settlement announced Friday will form the basis ofa Save-A-Watt proposal Duke will make to S.C.
regulators this The S.C. Public Service Commissiohn rejected Duke’s first proposal in February. Save-A-Watt is an energy-efficiency initiative Duke has been toutingfor years. The proposal comprises a seried of programs to help customers use less electricity or shift their use of powerfrom peak-demand hoursa to low-use times. Some of the programs — such as discountx for energy-saving light bulbs and financial incentives tobuy high-efficiency appliances — started June 1 in both Carolinas. But neither state has approved thefull initiative. The has led the environmentap groups in dissectingthe program.
Opponentsd contended the original proposal wouled reward Duke too handsomely and primarily for shifting the use of electricity frombusy times. That wouldx conserve little energy but save utilities Steve Smith, executive director of the alliance, says his group’s concerj from the beginning was to make sure Save-A-Watr resulted in significant reductionds in energy use. In Nort h Carolina, the commission approved Save-A-Watt’s programs but withhelrd judgmenton Duke’s compensation. The commission asked for additiona l comments on the As opponents were formulatinv their responses tothat request, they and Duke resumeds negotiations in North Carolina.
Any settlement here could create a template for the prograjm inSouth Carolina. One key feature of the compromise will be the creatioh of an advisory group that will assist in reviewintgfor Save-A-Watt. Duke Energy Carolina is a divisionof Charlotte-based