Duke Energy Merger: Big Changes for Energy Efficiency in the Carolinas

This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.

Guest Blog | September 17, 2012 | Energy Efficiency, Utilities

Last week, I wrote about the implications of the Duke-Progress merger on Florida energy efficiency programs. And while Duke’s programs in the Carolinas are better than in Florida, they are by no means “best practice” programs.

Fortunately, we’ve got a settlement for that!

Late last year, we worked with several allies to reach a settlement covering several issues we raised in the merger proceedings, notably including an agreement to work towards doubling or even tripling energy efficiency programs.

Under the agreement, the “new” Duke Energy’s two operating utilities, Duke Energy Carolinas and Progress Energy Carolinas, will each adopt aggressive, but realistic energy efficiency savings targets.   The settlement agreement sets an annual energy efficiency (EE) savings target of 1% of retail sales starting in 2015, and a 7% cumulative target over the 2014-2018 time period (5 years) for each utility.  Compliance with the targets is subject to good-faith efforts by the utilities to develop and obtain approval for the programs necessary to achieve these targets. This settlement should lead to lower costs, lower bills, lower rates and more jobs.

Achievement of the targets will require successful development, regulatory approval and implementation of EE programs. The parties to the settlement will engage in good-faith discussions to move this process forward. Some of the programs that could be proposed for approval are:

  • Waste heat recovery or combined heat and power projects (behind the meter scale);
  • Industrial “self-direct” programs including accountability and funding enhancement;
  • Small commercial and residential new construction programs; and
  • Residential cool roofing programs.

Program expansions (e.g., supporting LED and other advanced lighting technologies) and enhancements (e.g., performance contracting) could also be critical to achieving the targets.

Benefits to Customers

Total energy savings from the “new” Duke Energy’s efficiency programs in the Carolinas could lead to customer bill savings of over $2 billion over the lifetime of installed measures. These savings will grow in future years as the programs continue to operate and potentially expand. While the benefits and cost of these new programs cannot be accurately determined until they are proposed, the financial impact of the programs can be estimated based on recent experience in the Carolinas and the knowledge that these results are fairly typical of energy efficiency programs operated in many different states and utility territories.

2014-18 Estimated Settlement Impact:
Financial Impact During Commitment Period

Energy Savings
Program Costs
$ millions
Net Bill Savings
$ millions
Settlement Commitment (7%) 8,599 1,720 2,580
2011 Utility Resource Plans 2,928 586 878
Settlement Impact 5,672 $ 1,134 $ 1,701

Note: Settlement costs and bill savings based on representative data from Carolinas utilities.

Economic Benefits

Achieving these aggressive energy efficiency targets will generate economic opportunities for businesses to deliver energy efficiency programs … and those businesses will need to hire thousands of new employees to perform services such as energy audits, weatherization, and installation of high-efficiency manufacturing equipment. Based on ACEEE’s job calculator, the peak net job impact will be reached in 2018 when over 2,500 new jobs will be created due to direct investment in energy efficiency and indirect effects of the increased economic activity. Most of these new jobs are likely to be located in the Carolinas; and those affected by staffing reductions at Duke and Progress will welcome these opportunities as they have many of the skills needed to help lead and grow energy efficiency service businesses in the Carolinas.

Lower costs, lower bills, lower rates and more jobs. These are worthy goals for Duke Energy, is now the nation’s largest utility, and it is a welcome development to see this ambition embraced in the Southeast.

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