Duke Energy Merger: Big Changes for Energy Efficiency in Florida

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

Guest Blog | September 13, 2012 | Energy Efficiency, Utilities

Several weeks ago, I wrote about how the struggle for the future of utilities is reflected in the continuing drama of the Duke – Progress utility merger. I wrote on the occasion of a North Carolina investigation into the closure of the merger. With the drama of a CEO switch receding into yesterday’s news (perhaps), attention is shifting to the practical fallout of the merger, including staff layoffs and “re-branding,” and the enormous question of what is to happen with Florida’s nuclear power future.

Of great interest to clean energy advocates will be the impact of the merger on the utility’s energy efficiency programs. Will the three southeastern “operating companies” owned by Duke gradually align their energy efficiency programs, or will they remain distinct?

In 2011, Duke Energy Carolinas achieved twice the energy savings of its new sister utility operating companies. What is remarkable is that both Carolinas utilities have ramped up their programs in just two years. Their energy efficiency programs in Florida have over a decade of history and experience, and are falling behind.

Progress Energy Florida faces some particularly difficult challenges that energy efficiency could help solve. With the future of its “Humpty Dumpty” nuclear reactor in question, Duke Energy could take urgent steps to ramp up energy efficiency programs in Florida. Duke Energy has the resources to achieve this goal: In the Carolinas, Duke has demonstrated the ability to “go big” at low cost, and Progress has demonstrated the ability to incorporate new technology and program delivery methods. If the new Duke Energy builds on the best of both utilities approaches, we expect great things in Florida.

Duke can offer Florida a cost-conscious approach to energy efficiency.

In 2009, we reached settlement with Duke Energy Carolinas regarding its “Save-a-Watt” proposal, creating an agreement with a financial structure that rewarded performance: high energy savings and low costs. Back in 2009, Duke forecast its costs at about 2.3 cents per kWh saved, but so far Duke has averaged about 1 cent per kWh, leading the region in low-cost savings.

While Progress has demonstrated good cost control in the Carolinas, its Florida utility is not so thrifty. Fortunately for ratepayers, its costs are nowhere near as high as Progress’s Florida spokesman claimed they would be in 2010. While unusually high, its costs are not turning out to be as bloated as the utility represented in its plans.

Duke can offer Florida updated and more effective efficiency program practices.

In addition to high costs, Duke Energy now owns some of the most outdated energy efficiency programs in the country. Its Florida programs feature outdated practices, with most programs developed to meet weak conservation goals established by the Florida Public Service Commission (FPSC) in 2004.

Duke can offer Florida a performance-based approach that is good for the utility and its customers.

A third way that the Florida operations differ from the Carolinas is the opportunity to earn profits.

Duke Energy’s Southeastern Utilities Earn Profits on Power Plants? Earn Profits on Energy Efficiency?
Duke Energy Carolinas Yes Yes
Progress Energy Carolinas Yes Yes
Progress Energy Florida Yes No

Is it any wonder that customers get more help saving energy in the Carolinas than in Florida?

Progress Energy Florida should have a performance incentive that ensures Duke Energy shareholders earn a profit for energy efficiency success. In fact, of Duke’s six operating companies, its Florida utility will be the only unit without a performance incentive for its energy efficiency programs. SACE has endorsed such a structure in past FPSC proceedings, but (oddly enough) we have not received support from any of the state’s investor-owned utilities.

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