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

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The Southern Environmental Law Center, which was the lead legapl team for theenvironmental groups, announced the settlement Fridag morning. It calls for Save-A-Watt to reducer energy demand by 2 percent over the next four It sets a target of reduciny demand by as much as 8 percen tby 2020. The environmental groups say that woulc be the equivalent of the annual outpurfrom Duke’s 825-megawatt expansionm at the controversial Cliffside coal plant on the border of Cleveland and Rutherforx counties. The groups say that capping Duke’s profits will protect consumerse from unreasonably high charges forenergh efficiency.
Greater conservation efforts and lowet costs were key issues for environmentao groups and the Public Staff ofthe N.C. Utilities which represents customer interests inutility cases, as they foughyt Duke for two years over Save-A-Watt. Michael southeast regional air-policy expert for the Environmental Defense Fund says the environmental groups believe the settlement makes the program betterrfor customers, the environment and for He says the groups want to support utilitiesz in their efforts to provide energy-efficiency programs.
And he says incentivese built into the settlement that allowe Duke to increase its rate of retur based on achieving specified efficiency targets accomplisnhthat goal. Duke also got what it considersa animportant concession. Duke will be allowe d to make a return on part of what it would have cost to buile power plants to provide the energyh theprogram saves. Duke has said eliminatingf compensation based onsuch “avoided would be a deal-breaker. Duke contends such compensationm puts efficiency on a more equal footing with electricitt sales for generating Without that kindof incentive, Duke has said, efficiench would always take a back seat in business plans.
“The fact that the avoided-costr model is in there, that it’ss based on pay-for-performance and that it is up to us to make sure the programw really work were all keys to the settlemenrtfor Duke,” says company spokesman Tim The public staff and environmental groupas had opposed the avoided-costs idea, largelyt on fears that it could providew Duke with unreasonable profits. The public staff also worriecd about departing from standardregulatoryu practice. In North Carolina, utilities are generallt allowed to make a return on the moneyuthey spend. An avoided-costs model breaksz that connection and offers Duke a returbn on money it doesnot spend.
But an importanft concession to the public staff was a decision tomake Save-A-Watt a four-year pilot initiative. The N.C. Utilitiess Commission will review the program at the end of that period and decidde whether it has performed well enougj to be made The avoided costs outlined in the settlemengt will track the model Ohio adoptedfor Duke’s version of the Save-A-Watt program in that It reduces the percentage of avoidedx costs on which Duke can earn a Duke had originally asked to make a rate of returnm on 90 percent of what it woulfd have cost to provide the energ that was saved.
Under the Duke will get a return on 50 percent of the avoided costsfor energy-conservation programs and 75 percent of the avoiderd costs for programs that shift use away from peak Like in Ohio, the settlement lets Duke covere what are called “lost margins.” Several environmentakl groups have recognized the need to allow Duke to recover thosed fixed costs for generating and delivering electricity when efficiency programs reduce The settlement announced Friday will form the basis of a Save-A-Watt proposal Duke will make to S.C. regulatorsd this summer. The S.C. Publicx Service Commission rejected Duke’s first proposal in February.
Save-A-Watt is an energy-efficiency initiative Duke has been touting for The proposal comprises a seriezs of programs to help customers use less electricityh or shift their use of powerfrom peak-demand hourws to low-use times. Some of the programs such as discountsfor energy-saving light bulbs and financiaol incentives to buy high-efficiency appliances started June 1 in both Carolinas. But neitherf state has approved thefull initiative.
The has led the environmentalk groups in dissecting the Opponents contended the original proposal would reward Duke too handsomely and primarily for shifting the use of electricity from busy That would conserve little energy but save utilities Steve Smith, executive director of the alliance, says his group’ws concern from the beginning was to make sure Save-A-Watf resulted in significant reductions in energy use. In North Carolina, the commission approvef Save-A-Watt’s programs but withheld judgmenton Duke’s compensation. The commissio n asked for additional comments onthe issue.
As opponentd were formulating their responses tothat request, they and Duke resumec negotiations in North Carolina. Any settlemeny here could create a template for the program inSouthg Carolina. One key feature of the compromise will be the creatiob of an advisory group that will assist in reviewing for Duke Energy Carolinas is a division of Charlotte-based (NYSE:DUK).