Weekly Briefing

Why everyone should care about Duke Energy's "conservation" proposal

"We wouldn't go to Krispy Kreme for a healthy diet plan or Exxon for fuel-savings tips. Why should we expect energy efficiency from Duke?"

Charlotte Observer op-ed contributor Lisa Zerkle

There is good news and bad news in the world of energy production and distribution these days. The good news is that, after years of denial, even giant corporate behemoths (oil companies, electricity companies and others) are beginning to publicly acknowledge that things cannot go on like they have been.

Unless they want to drown in their own effluent or continue to transfer an unsustainable share of their national treasure to the world's political tinderbox, Americans are going to have to change how they consume energy. And notwithstanding the absurd denials of the Flat-Earthers on the market fundamentalist right, it's clear this will mean dramatically improving energy efficiency and radically reducing carbon emissions. Heck, even Exxon-Mobil is running a ubiquitous series of TV and print ads about its work to "reduce greenhouse gases."      

The bad news is twofold:

1) America has wasted a tremendous amount of time - particularly during the last seven and a half years - during which it could have been moving aggressively to confront the problem. The hole we've dug for ourselves is much deeper than it should be.

2) Even now, the progress is coming at a glacial pace (or at least the pace that glaciers used to move). Despite the broad consensus regarding the need for swift and dramatic action to curb carbon emissions and to find new and sustainable energy sources, corporate greed continues to get in the way. Add to this mix our societal tendency to ignore the poor and/or to ask them to pay a disproportionate share of the bill for solving shared problems and you've got a good picture of where things stand right now.

"Save-A-Watt"    

A poster child for the improving but still badly flawed state of affairs in the current energy policy environment is Duke Energy's proposed "Save-A-Watt" program. Duke, of course, is the principal electricity provider for much of western and west central North Carolina. It currently serves more than 1.8 million customers. It is a regulated monopoly that is entitled by law to be the sole electricity provider to all customers in its designated service area in exchange for public regulation of its profit margin.

Save-A-Watt (or SAW for short) is a plan under which Duke proposes to impose a new surcharge on customers to promote efficiency. The company's idea goes something like this:

"We're going to have to build a bunch of new and expensive power plants that we'll have to charge customers for in the years ahead. How about instead we invest in energy efficiency programs that cost less than new power plants but that will free up some of that demand for electricity? If we charge customers somewhat less than what all those new plants will cost, it's a win-win for everyone, right?"   

At first blush, the idea seems to make sense. Indeed, it's not really a new concept. The idea of "demand side management" (that savings and benefits could accrue to all parties through better efficiency programs) has been around for decades. The devil, though, is in the details.

According to the Utilities Commission Public Staff - a publicly funded team of lawyers, engineers, financial experts and other professionals that usually takes moderate positions with respect to various utility company initiatives - the SAW idea is a huge overreach that would provide Duke with exorbitant profits and the public with only very minimal energy efficiency benefits. According to the Public Staff's calculations, customers could end up paying more than $18 for an energy saving compact fluorescent light bulb that currently retails at some places for less than $2. In general, their experts place the SAW program's cost to customers at 200% to 300% of the price charged by similar programs in other states.

The Public Staff's position has been seconded by a bevy of experts for various environmental, consumer (both commercial and residential) and social justice organizations. In general, these critics agree that efficiency programs are urgently needed, but that SAW is too expensive and complicated and doesn't save enough energy.

According to Donald Gilligan, President of the National Association of Energy Service Companies and expert on behalf of several environmental organizations, customers will receive a "meager" benefit while Duke will "capture for itself virtually all of the value…that accrues to ratepayers in other states for the same types of programs."

Dr. John Blackburn, Economics Professor Emeritus at Duke University and an expert on behalf of the NC Waste Awareness and Reduction Network, agrees. He calls the company's proposed profits "excessive" and argues that energy savings of far more than Duke proposes can be easily attained.

Most experts agree that a better model would take the duty for promoting and implementing energy efficiency programs away from Duke and other electric generators and put it in the hands of a truly independent, public administrator. According to a 2007 report prepared for the nonprofit, Clean Water North Carolina, several states have had significant success in reducing electricity demand in recent years at a much lower cost to customers via such a model.

In short, SAW reflects the good and the bad in the recent awakening amongst America's energy giants. It's good in that it accepts (or at least pays lip service to the concept) that energy efficiency is worth investing in. It's flawed (in the case of SAW, fatally so) in that it proposes an enormously complex and confusing scheme that raises consumer bills, provides minuscule energy savings (maybe 1 or 2%) and generally leaves the utility fox guarding the energy conservation hen house. 

A double-whammy for the poor

Even if SAW worked for average residential and commercial consumers, few if any of its purported benefits would trickle down to low-income North Carolinians - particularly renters who move a lot and who have little independent ability to implement energy conservation tactics in their homes. According to the testimony of Roger Colton, expert for the North Carolina Justice Center, AARP NC, the N.C. Council of Churches and Legal Aid of North Carolina, Duke's claims about SAW and its benefits to low-income people are "objectively wrong."

Colton continues:

"Not only do the proposed Duke Energy programs fail to serve the company's low-income population, but Duke Energy has failed to take advantage of the extensive information that is available indicating that cost-effective efficiency programs can be delivered to low-income customers."

According to Colton, a classic example of Duke's failures in this area can be found in its proposed residential "Smart $aver" program which would seek to support the purchase of energy efficient appliances. Colton notes that:

"The energy efficiency incentives provided through the Smart $aver program apply only to electric heat pumps and central air conditioning systems."

Colton argues that this example is but one part of a proposal that not only ignores or excludes low-income people but that "affirmatively harms" them with higher rates and virtually nothing in the way of direct benefits.

Going forward

Though flawed beyond repair, the Save-A-Watt program does offer a small shred of hope to North Carolinians who feel trapped by their state's addiction to a mid-20^th Century approach to energy production and conservation: it helps cement the broad consensus that something can and must be done. The next step is for the state Utilities Commission to reject Duke's grab for excessive profits and control and put North Carolina on the path to a better, cheaper, and more effective model for change. Let's hope the Commission does the right thing and soon.    

(You can learn more about the shortcomings of Save-A-Watt at an NC Policy Watch Crucial Conversation luncheon tomorrow, July 31, in downtown Raleigh. Click here for details.) 

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This entry was posted on Wednesday, July 30th, 2008 at 12:41 pm and is filed under Weekly Briefing. You can follow any responses to this entry through the RSS 2.0 feed.