Oct. 26, 2011 10:25

Duke Energy 17 percent rate increase proposal meets resistance

On Thursday, the NC Utilities Commission will hold a public hearing at High Point City Hall to gather citizen input about a requested rate increase by Duke Energy Carolinas. The utility company has filed a “rate case” with the commission that would increase residential rates 17 percent and business rates by 14 percent. The meeting, one of six being held around the state, is scheduled to begin at 7 p.m.

Betsy Conway, a spokesperson for Duke Energy, said in an e-mail that the primary driver of the proposed rate increase is the company wants to begin recovering its $4.8 billion investment in its electric system over the past two years. According to the company’s website, 74 percent of the revenues generated by the rate increase will go toward the Duke Energy’s capital investments and costs associated with system modernization to comply with state and federal regulations, 15 percent will go toward additional financing and other costs, and 11 percent will help the company make up for a decrease in demand for electricity.

Carol Shrum, vice president of rates for Duke Energy, said energy rates are established by first determining the total revenues needed to recover the company’s costs to build, operate and maintain the electrical system. The big cost driver in rate cases is capital additions, like Duke Energy’s Buck Natural Gas-Fired Power Plant. The NC Utilities Commission has three options: deny the request, approve the request with revisions, or approve the request as filed. Typically, rate cases are approved with some modifications, Shrum said.

Jim Warren, executive director of NC WARN, a Durham-based nonprofit, takes issue with Duke Energy’s stated reasons for the rate increase.

“They’re charging the public huge dollars to put Band-Aids on [power] plants that should be phased out,” Warren said.

If approved by the NC Utilities Commission, Warren said Duke Energy’s rate increase would take effect in February, which means the utility’s 2.4 million customers will see their power bills increase 30 percent in two year’s time.

“They got a nearly 8 percent rate hike that began last year, now they’re asking for [17] percent more for residential, and they put in a 5 percent fuel increase, so what they’re seeking would bring rates to 30 percent higher to what rates were last year,” Warren said.

The business strategy Duke Energy is currently pursuing — a 20th century business model centered on building more coal, nuclear and natural gas power plants — will cause their customers’ rates to be repeatedly raised over the next several years, Warren added.

For example, under its new system modernization effort, Duke Energy has spent hundreds of millions of dollars to add an additional unit to the coal-fired Cliffside plant west of Charlotte.

Duke Energy should focus on energy efficiency and conservation programs as well as renewable sources of energy such as wind and solar, Warren argues.

“We are wasting half of the energy we consume in the US,” he said. “Energy efficiency programs knock down demand and now, solar and wind technologies have developed to a stage that we can be putting them in at a superior cost level.”

NC WARN argues in a report that solar and wind power can produce three-quarters of the power needs for the state.

“Economically and environmentally, the path [Duke Energy] is on is madness and we have to get off that path,” Warren said. “The public has to get involved — people need to show up for these public hearings. If they’re not concerned about their environment, they should be concerned about their pocketbooks because these guys are on a path to double our power bills over the next few years.”

William Schlesinger, president of Cary Institute of Ecosystem Studies, said the scientific community is unanimous about the connection between the burning of fossil fuels and climate change, and of all the fossil fuels, coal is the dirtiest.

“Coal is always going to be the worst because it has the most carbon release per unit of energy,” Schlesinger said. “I would like to see coal-fired power plants phased out as quickly as possible in favor of renewables. I’m no economist but I can’t help but think there are significant amount of jobs [that] will be created in the [renewable] energy sector.”

Schlesinger characterized Duke Energy’s rate increase as a “great boondoggle” where their customers are providing the financial backing for their investments in more coal, nuclear and natural gas plants.

“I find that appalling for a regulated utility that has a monopoly on their district,” Schlesinger said. “They don’t have to compete cost-wise with anyone yet they’re able to pass on the cost of their blunders to the public.”

Conway said Duke Energy is investing heavily in renewable energy, not only in North Carolina but also across the country.

“Duke Energy Renewables has invested more than $1.75 billion to rapidly grow its portfolio of zero-emission generating assets,” she said. “The company currently owns and operates approximately 1,000 megawatts of wind energy capacity, with another 5,500 megawatts of potential projects in the pipeline. On the solar energy side, Duke Energy Renewables has 17 megawatts in commercial operation, with additional development projects under way.”

The Center for Global Development ranks Duke Energy’s Belews Creek plant in Forsyth County as the 28th highest CO2emitting power plant in the nation, belching an estimated 13.6 million tons of carbon dioxide into the local environment annually. In 2009, there were 1,436 coal-powered units at electrical utilities across the nation, according to the US Department of Energy.

A study by the NC Department of Health and Human Services that estimated at least 13,677 children per year are born in the state with blood mercury levels that place them at risk for lifelong learning disabilities, fine motor and attention deficits, and lowered IQ, according to the department’s website. Man-made releases of mercury come from two sources and one of those sources is the combustion of coal.

Conway stated that Duke Energy is implementing an aggressive modernization strategy that is retiring older, less efficient coal units and has invested in both solar, wind and natural gas.

We also continue to believe advanced and well-controlled coal generation should be part of our diverse portfolio of fuel sources to maintain affordability and reliability for our customers, Conway said.

Duke Energy has invested $5 billion in emissions control technology in the last decade — almost $2.5 billion in the Carolinas alone, said Conway. The use of these technologies has resulted in about an 80-percent reduction in Duke Energy’s nitrous oxide emissions since 1997 and 70 percent reduction in sulfur dioxide emissions since 2005, she added.

Duke Energy will comply with the upcoming federal utility Maximum Achievable Control Technology rules that place limits for mercury and other air emissions. Duke Energy’s new Cliffside Unit 6 meets Best Available Control Technology limits for mercury, as determined by the state, said Conway.

Schlesinger agreed with Warren that the public health aspect of Duke Energy’s business strategy should weigh heavily on the minds of its customers.

“We need to squeeze every bit of efficiency into the system of how we use energy and move into the area of renewables,” he said. “North Carolina has a great possibility for offshore wind power as well as solar and geothermal.”

Duke Energy is requesting a 12-month rider to cover $3.7 million of costs associated with its abandoned Coastal Wind Turbine Project. Warren said the Coastal Wind Turbine Project failed because Duke Energy did not make a substantial enough investment and was not committed to the project’s success.

Conway said Duke Energy’s “coastal wind demonstration project” was designed to determine the feasibility of wind power by building three wind turbines. However, the company determined that it would be too costly to build three wind turbines, and abandoned the project.

Warren said Duke Energy is seeking to impose the rate increase to underwrite its risky plan to build new nuclear power plants. Conway flatly rejected Warren’s assertion.

“There are no costs in the rate case associated with new nuclear generation,” Conway said. “The rates customers pay is determined by the revenue requirement, which is the money needed to cover all operating and capital costs of providing electricity to customers…. Duke Energy Carolinas’ request to increase rates is designed to begin recovering the dollars already spent.”

“No one likes rate increases,” Conway continued. “But they’re necessary to ensure the availability of affordable, reliable and clean electricity today, and for decades to come.”

The manner in which Duke Energy supplies power to its customer base could have impacts on the environment for decades to come, said Schlesinger. A number of scientists believe that if we don’t change course soon, we will reach and go past the “tipping point.”

“Several people have said if we don’t do anything by 2020 where the carbon dioxide might be 450 parts per million in the atmosphere, we’ve lost the opportunity,” he said.

Warren said he’s hopeful that scores of ordinary citizens as well as those involved in the Occupy Winston-Salem and Occupy Greensboro movements will make their voices heard at Thursday’s public hearing.

“It’s really exciting to see this citizens movement happening, but we are running short on time,” he said. “People are already being harmed by coal and climate disasters all over the world. If [Duke Energy] can be moved in the other direction, and I’m convinced they can, it will send positive shockwaves across the nation and across the world.”

NC Rate Change Public Hearing, Thursday at 7 p.m., High Point City Hall Council Chambers, 211 South Hamilton St., High Point

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