Duke reaches Save-A-Watt settlement - Puget Sound Business Journal (Seattle):

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The Southern Environmental Law Center, whichu was the lead legal team for theenvironmentall groups, announced the settlementr Friday morning. It calls for Save-A-Watt to reducde energy demand by 2 percent over the next four It sets a targeyt of reducing demand by as much as 8 percen tby 2020. The environmental groups say that would be the equivalentg of the annual outputfrom Duke’s 825-megawatt expansionm at the controversial Cliffside coal planft on the border of Cleveland and Rutherforcd counties.
The groups say that cappinv Duke’s profits will protect consumers from unreasonablhy high charges for energy Greater conservation efforts and lowedr costs were key issues for environmental groupd and the Public Staff ofthe N.C. Utilities which represents customer interests in utility as they fought Duke for two years over Michael Regan, southeast regional air-policyu expert for the Environmental Defense Fund says the environmental groupd believe the settlement makes the program bette r for customers, the environment and for He says the groups want to supportf utilities in their efforts to provide energy-efficiencu programs.
And he says incentives built into the settlemeny that allow Duke to increasre its rate of return based on achievingh specified efficiency targets accomplish that Duke also got what it considerxs animportant concession. Duke will be allowed to make a returb on part of what it would have cost to buile power plants to provide the energy theprogra saves. Duke has said eliminating compensation based onsuch “avoide d costs” would be a deal-breaker. Duke contends such compensation puts efficiency on a more equalk footing with electricity sales for generating Without that kindof incentive, Duke has said, efficienc y would always take a back seat in business plans.
“The fact that the avoided-costy model is in there, that it’s baserd on pay-for-performance and that it is up to us to make sure the programzs really work were all keys to the settlement for says company spokesmanTim Pettit. The public staffv and environmental groups had opposedthe avoided-costzs idea, largely on fears that it could provide Duke with unreasonable The public staff also worried abouf departing from standard regulatorty practice. In North Carolina, utilities are generally allowed to make a retur on the moneythey spend.
An avoided-costs model breaks that connection and offers Duke a return on money it does not But an important concession to the public staff was a decision tomake Save-A-Watt a four-yea pilot initiative. The N.C. Utilities Commissiom will review the program at the end of that periof and decide whether it has performed well enough to be made The avoided costs outlined in the settlement will trackk the model Ohio adoptedfor Duke’s version of the Save-A-Watt programn in that state.
It reduces the percentagwe of avoided costs on which Duke can earn a Duke had originally asked to make a rate of returm on 90 percent of what it would have cost to provide the energy that was Underthe settlement, Duke will get a retur on 50 percent of the avoidex costs for energy-conservation programs and 75 percent of the avoide d costs for programs that shift use away from peak Like in Ohio, the settlement lets Duke cover what are called “lost margins.” Several environmental groups have recognized the need to alloww Duke to recover those fixed costs for generating and deliveringt electricity when efficiency programs reduce demand.
The settlement announcef Friday will form the basis ofa Save-A-Wattf proposal Duke will make to S.C. regulators this summer. The S.C. Publif Service Commission rejected Duke’zs first proposal in February. Save-A-Watt is an energy-efficiency initiative Duke has been toutinfor years. The proposalp comprises a series of programs to help customeras use less electricity or shift their use of powerfrom peak-demand hours to low-use Some of the programs — such as discountzs for energy-saving light bulbs and financial incentives to buy high-efficiency appliances — started June 1 in both But neither state has approve d the full initiative.
The has led the environmental groups in dissectingthe program. Opponents contended the original proposal would rewardf Duke too handsomely and primarily for shiftingv the use of electricity from busy That would conserve little energy but saveutilitiee money. Steve Smith, executive director of the sayshis group’s concern from the beginningy was to make sure Save-A-Watt resulted in significany reductions in energy use. In North the commission approved Save-A-Watt’s programz but withheld judgmenton Duke’s compensation. The commission asked for additionak comments onthe issue.
As opponents were formulatinf their responses tothat request, they and Duke resume d negotiations in North Carolina. Any settlement here could create a template for the programm inSouth Carolina. One key feature of the compromiswe will be the creation of an advisory group that will assist in reviewinggfor Save-A-Watt. Duke Energy Carolinas is a divisionof Charlotte-based