When Duke Energy CEO James Rogers comes to Raleigh Aug. 18 to testify before the N.C. Utilities Commission about the company's "Save-A-Watt" energy conservation program, he could either save or doom the controversial proposal.
A week of hearings before the utilities commission ended with Save-A-Watt coming under fire from critics who maintained that Duke's proposal would produce little in the way of energy efficiency but would be lucrative for the company—while penalizing low-income households.
Under Save-a-Watt, Duke would sell energy-saving products and services to customers while recouping 90 percent of the money it would have earned from electricity sales had the energy not been saved. Duke customers would reimburse the utility company that percentage in the form of a surcharge on their electric bills, including an estimated 98 cents per month for the average residential household.
In response, critics are suggesting two alternative approaches to Save-a-Watt. One would limit Duke's earnings from conservation to the same formula used in its core electricity business. The second, more comprehensive approach favored by most of Duke's critics would require the utilities commission to establish a new public benefits fund and to set maximum energy efficiency as the goal of any conservation program the commission approves.
Like Save-a-Watt, a public benefits fund would be financed with surcharges on utility customers—but unlike Duke's proposal, it would be controlled by an independent entity, not a utility. The state's giant utilities, Duke and Progress Energy, are in the business of selling electricity, critics say, and neither has shown much zeal for conservation or reducing electricity sales.
At issue is whether state law, including reforms in Senate Bill 3 enacted last year, would permit the utilities commission to order the creation of a public benefits fund. Commission Chairman Edward Finley posed that question to Duke Energy Carolinas President Ellen Ruff during her testimony last week. She didn't answer directly, but later Duke's attorney, Robert Kaylor, told another witness dismissively that the idea of an independent public benefits fund was raised in connection with SB 3 discussions, but wasn't included in the bill.
(SB 3 was diluted during months of high-powered negotiations among utility companies, environmental interests, lawmakers and lobbyists in"605s," which are ostensibly public, but then-unpublicized, meetings so named because they were held in Room 605 of the legislative building.)
"I can tell you, there was extensive debate [on that subject]," Kaylor said, "and that approach was rejected."
SB 3 does charge the commission with the broad task of determining how to achieve "optimal energy efficiency" at the least cost to consumers. But under Save-a-Watt, Duke customers would pay at least twice as much as in other states, critics say. Duke would charge its customers roughly 5 cents per kilowatt hour saved, while in states where the utilities don't run the conservation programs, customers are charged 2-3 cents per kilowatt hour.
And Duke's surcharges don't translate to significant savings compared with some other states' programs. According to Hope Taylor, executive director of Clean Water for North Carolina, Vermont's energy conservation program is run by an independent nonprofit corporation using a public benefits fund financed by a monthly 36 cents surcharge on residential customers. Vermont documented a 1.8 percent reduction in electricity usage last year, Taylor says. By comparison, Duke projects that its plan will reduce usage by less than 1 percent in its first four years—at a cost of nearly three times as much to customers.
Taylor's organization is interested in electricity conservation, she says, because electric plants use enormous amounts of water, but also "because there's a strong social-justice component" to the issue.
"We need to free ourselves [in North Carolina] from the expectation that only investor-owned utilities can provide energy conservation," Taylor argues.
Taylor's organization commissioned a study by Synapse Energy Economics, a Cambridge, Mass., consulting firm, of the six state energy conservation programs not controlled by investor-owned utilities: New York, New Jersey, Maine, Vermont, Wisconsin and Oregon. (A seventh, in Delaware, is newly established.)
Some of the six programs are run by the state's utility commission or by another state agency; two, in Vermont and Oregon, are operated by independent nonprofits created by order of the utility commissions. In most, utilities are represented on advisory boards; in several, notably Wisconsin, utilities are also contractors for the programs, competing against other private firms for the business. In New Jersey, however, utilities are legally barred from bidding for such contracts.
All these programs, Synapse reports, seek maximum energy conservation for all households, regardless of income. They do so by using comprehensive programs that combine home renovations, weatherization and electricity-saving devices like fluorescent lighting, automated thermostats and efficient appliances.
The programs also benefit by their statewide reach in marketing their services. The New York program, the oldest of the six, claims it saves three times as much electricity as it costs; over eight years the cumulative reduction in peak demand is about equal to one nuclear plant the state didn't have to build.
Save-a-Watt, by contrast, contains a built-in incentive to sell services to upper-income households while avoiding the poor, says Roger Colton, who testified at the hearing on behalf the N.C. Justice Center and the N.C. Council of Churches.
Colton is a principal in the consulting firm Fisher Sheehan & Colton and a longtime advocate for social-justice causes.
He says that low-income families live in small houses or apartments and use relatively little electricity. That makes marketing to them relatively costly. Nor are the poor commonly in the market for new, energy-efficient refrigerators and appliances. Plus, installing new efficiency devices in their homes may require taking on other repairs, like replacing rusty pipes or fixing holes in the roof.
Duke's program, Colton says, relies heavily on offering rebates to people who buy new appliances and whose large houses use more electricity.
Rob Schofield, research and policy director for the nonprofit N.C. Policy Watch, jokes that Duke's plan would attack conservation "at a glacial pace—or at least the rate glaciers used to move."
The Synapse report is available from the Clean Water for N.C. Web site, www.cwfnc.org.
An earlier version of this story was posted online July 30.