When utility companies ask for rate increases, they understand that angry customers are part of the deal, an unpleasantness to be endured until the hike is approved. But Duke Energy Carolina's proposed base rate increase, its first in North Carolina in 18 years, is unusual in that the utility's request faces heated, organized opposition in a political climate that has slightly cooled toward coal.
That's not to say the coal lobby has weakened: Duke Energy and Progress Energy cabals stalk the statehouse and help craft energy legislation, such as the controversial Senate Bill 3, which passed in 2007. And nationally, powerful coal interests are shaping the national energy bill. The New York Times reported Sept. 7 that lawmakers from coal-producing states "appear committed to keeping coal as the nation's primary producer of power."
But spurred by concerns over global warming—to which coal-fired power plants are a primary contributor—grassroots organizations, such as the 25 activist, religious and environmental groups that plan to protest the hike at the Sept. 10 public hearing in Durham, are gradually winning the war of public opinion.
Opponents of Duke Energy's increase for North Carolina customers are peeved about not only the amount—13.5 percent, on top of 4.5 percent already levied for fuel costs—but also about its purpose: Part of the money will go toward paying the financing costs for Cliffside, a $2.4 billion, 800-megawatt, coal-fired power plant in Rutherford County near Charlotte. Skeptics have long contended that if state policymakers and utilities focused on energy efficiency, conservation and renewable energy, Cliffside would be unnecessary; the N.C. Utilities Commission agreed, in part, when in 2007 it denied Duke Energy's request to build two Cliffside plants.
After several public hearings across the state, the utilities commission, which has different members than its 2007 counterpart, will determine whether to approve Duke Energy's proposed rate increase. If approved, customers could see their monthly bills go up by $18 beginning as early as January.
"Regardless of whether the rate increase is approved, it doesn't impact the plans for Cliffside," said Duke Energy spokesperson Paige Sheehan. "It has nothing to do with whether we build it."
The plant is about half finished, Sheehan said.
The additional $500 million in revenue would help pay for pollution control equipment, new power lines and new plant construction, the latter being a financing technique known as Construction Work in Progress (CWIP). (It is often used to fund construction of nuclear plants, which take a long time to be approved and built.) After N.C. ratepayers ate the costs of unfinished nuke plants in the 1980s, the legislature repealed CWIP. However, CWIP was resurrected among the many environmental concessions in Senate Bill 3.
Sheehan said paying the financing costs in advance—essentially the interest—would save Duke Energy about $250 million.
In three years, Cliffside's cost estimates have ballooned more than 200 percent from its original $750 million price tag.
On its Web site, Duke Energy says revenues from the rate hike and the construction of Cliffside are essential to meeting the growing energy demands of its residential, commercial and industrial customers. "History tells us that energy demand spikes dramatically when the economy rebounds," the utility's statement goes on.
However, opponents contend that Duke Energy is buttressing its demand argument by trolling for additional customers outside its service area in North Carolina, which provides power to 1.8 million customers. They point to the Orangeburg case, in which Duke Energy wanted approval from the utilities commission to sell energy at wholesale prices to the South Carolina town about two hours from Charlotte. The utilities commission ruled that Duke Energy had to charge higher rates to cover the cost of producing additional power; Orangeburg officials are appealing the decision to the Federal Energy Regulatory Commission. Duke Energy plans to take the case to the N.C. Court of Appeals.
"Demand is up because they're looking for customers," said Jim Warren, executive director of N.C. Waste Awareness and Reduction Network, longtime critics of Duke Energy.
Sheehan said utilities often serve customers outside their service area, and that the Orangeburg deal would have saved the town millions of dollars.
In a 15-page analysis of Duke Energy's usage estimates, John Blackburn, professor emeritus of economics at Duke University, and environmental attorney John Runkle contend there is no demand for extra energy. "Short-term and long-term growth is down," Warren said. "And if there is a rate hike, people will use less energy."
However, Sheehan said Duke Energy disputes N.C. WARN's assessment, adding that the utility is forecasting a 1.5 percent increase in demand over the long term.
If Duke Energy's demand does grow, it would fly in the face of the Environmental Protection Agency's projections, reported by The New York Times, "that power generation as a whole is expected to decline because of conservation."
Correction (Sept. 10, 2009): Duke Energy's Cliffside plant is in Rutherford County.