Duke reaches Save-A-Watt settlement - Pittsburgh Business Times:

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The Southern Environmental Law Center, which was the lead lega team for theenvironmental groups, announced the settlement Friday morning. It calls for Save-A-Watt to reduce energy demanf by 2 percent over the next four It sets a targe t of reducing demand by as much as 8 percentrby 2020. The environmental groupw say that would be the equivalenft of the annual outputfrom Duke’s 825-megawatt expansion at the controversial Cliffside coal plant on the borded of Cleveland and Rutherford counties. The groupsd say that capping Duke’s profits will protect consumerz from unreasonably high charges forenergy efficiency.
Greatee conservation efforts and lower costs were key issuesa for environmental groups and the Public Stafc ofthe N.C. Utilities which represents customer interests inutility cases, as they fought Duke for two years over Michael Regan, southeast regional air-policy expert for the Environmental Defense Fund says the environmental group believe the settlement makes the program better for the environment and for Duke. He says the groupsx want to support utilities in their effort s toprovide energy-efficiency programs. And he says incentives built into the settlement that allow Duke to increasse its rate of return based on achieving specified efficiency targets accomplishthat goal.
Duke also got what it considersa animportant concession. Duke will be allowedr to make a return on part of what it woulr have cost to build power plants to provide the energu theprogram saves. Duke has said eliminating compensation bases onsuch “avoided costs” would be a Duke contends such compensation puts efficiency on a more equal footingy with electricity sales for generating profits. Without that kind of Duke has said, efficiency woulde always take a back seatin utilities’ business plans.
“The fact that the avoided-cost model is in that it’s based on pay-for-performance and that it is up to us to make sure the programss really work were all keys to the settlementtfor Duke,” says company spokesman Tim Pettit. The public staff and environmentalk groups had opposedthe avoided-costw idea, largely on fears that it could provid e Duke with unreasonable profits. The public stafrf also worried about departinbg from standard regulatory InNorth Carolina, utilities are generally alloweds to make a return on the money they spend. An avoided-costs model breaks that connection and offers Duke a returnm on money it doesnot spend.
But an important concession to the public staff was a decisiom tomake Save-A-Watt a four-year pilot initiative. The N.C. Utilitiexs Commission will review the program at the end of that periods and decide whether it has performed well enough to be made The avoided costs outlined in the settlement will tracj the model Ohio adoptedfor Duke’s version of the Save-A-Watrt program in that state. It reduces the percentage of avoidedc costs on which Duke can earn a Duke had originally asked to make a rate of returbn on 90 percent of what it woulrd have cost to provide the energy thatwas saved.
Undefr the settlement, Duke will get a return on 50 percengt of the avoided costsfor energy-conservation programs and 75 percent of the avoided costd for programs that shift use away from peak Like in Ohio, the settlement lets Duke covefr what are called “lost margins.” Several environmental groupsz have recognized the need to alloa Duke to recover those fixed costs for generatinhg and delivering electricity when efficiency programs reducee demand. The settlement announced Friday will form the basis ofa Save-A-Watg proposal Duke will make to S.C. regulatorw this summer. The S.C. Public Service Commission rejecteds Duke’s first proposal in February.
Save-A-Watt is an energy-efficiencg initiative Duke has been toutinghfor years. The proposal comprises a series of programds to help customers use less electricity or shift their use of powetfrom peak-demand hours to low-use times. Some of the programs such as discountsfor energy-saving light bulbs and financial incentives to buy high-efficiencyu appliances — started June 1 in both But neither state has approved the full initiative. The has led the environmentakl groups in dissectingthe program. Opponents contendef the original proposal would reward Duke too handsomely and primarilh for shifting the use of electricity frombusy times.
That wouls conserve little energy but save utilities Steve Smith, executive director of the says his group’s concernm from the beginning was to make sure Save-A-Watyt resulted in significant reductions in energy use. In Nortbh Carolina, the commission approved Save-A-Watt’ws programs but withheld judgmenton Duke’s The commission asked for additional comments on the As opponents were formulating their responses to that they and Duke resumeed negotiations in North Carolina. Any settlemen here could create a template for the prograj inSouth Carolina. One key featurse of the compromise will be the creatioh of an advisory group that will assist in reviewinbgfor Save-A-Watt.
Duke Energy Carolinas is a divisionof Charlotte-basedd (NYSE:DUK).