Duke's Save-a-watt plan will save what?

Duke Energy has plans to meet one-fourth of its power generation needs through energy efficiency and renewable energy sources by 2030. Most folks would say that sounds good. Avoiding the costs of new traditional generating facilities will save billions of dollars for ratepayers and take advantage of sustainable sources such as wind and solar.

But in a N.C. Utilities Commission hearing room in Raleigh, Duke Energy and public advocates are squaring off over Duke's proposed Save-a-watt program, designed to save enough power to eliminate the need to build two natural gas power plants in the four years of the program. It intends to help customers make more efficient use of power through energy-saving devices and practices, with the encouragement of incentives and rebates. Duke won't get paid for the program unless and until it produces savings, the company says, so its shareholders assume all the risk. Duke will charge average residential customers about $1 a month at the beginning of the program; customers who participate in the Save-a-watt program will realize savings of about $5 a month on their bills.

The Public Staff of the N.C. Utilities Commission takes issue with the Save-a-Watt program, arguing that it doesn't save enough energy fast enough, costs ratepayers too much and allows Duke to earn a huge return on its money. That winds up benefitting Duke's stockholders far more than its customers, the staff says.

The Public Staff was set up in 1977 to represent the public interest in regulated utility cases. Its arguments rest on calculations showing that Duke's plan would produce only minimal savings by the year 2015 – about 0.23 percent per year in the first four years. Compared to 20 other utility company energy saving plans that have realized savings of 1 percent every year, Duke's plan wouldn't do enough to generate real savings, the Public Staff argues.

Among other things, the staff's expert testimony suggested that customers would pay more than $18 for compact fluorescent bulbs that could be bought at a discount chain for less than $2. The staff also argued that the financial model would give Duke a 61 percent return on the program's costs, but a reasonable return would be 6.8 percent.

Duke argues that encouraging a switch to compact fluorescents will cost the company money, and points out that its calculations show only an 18.2 percent return after taxes and lost revenues are counted. And the company notes that other companies that show a higher percentage of energy savings charge much higher rates for electricity than Duke, exaggerating the impact of energy efficiency savings.

These hearings are to resume Aug. 18 when Duke CEO James Rogers will testify about the plan. Perhaps Mr. Rogers will be more persuasive in making Duke's case for the Save-a-watt program. But based on testimony before the commission so far, Duke's energy efficiency plans need significant revision – with more power savings than Duke's modest proposal.