Why Duke Energy Progress is proposing a NET rate decrease

For the proposed decrease to be a net decrease means, of course, that some factors are on the increase, but their effects are outweighed by the factors on the decrease. So let’s examine the press release from Duke Energy about their proposal. Here’s how it opens:

Duke Energy Progress’ North Carolina customers will see greater savings on their energy costs in 2016 if the company’s annual filings receive approval from the North Carolina Utilities Commission (NCUC).

Electric rates would decrease about 3.4 percent for residential customers, 2.6 percent for commercial customers and 1.8 percent for industrial customer bills – putting more money back into customers’ pockets.

Multiple factors drive customer savings

On June 17, 2015, Duke Energy Progress made its annual filings with the NCUC for costs associated with fuel, compliance with the state’s renewable energy portfolio standard (REPS), implementation of energy efficiency (EE), and demand-side management (DSM) programs.

The total monthly impact of all rate changes (fuel, REPS, DSM, EE) for a typical residential customer using 1,000 kilowatt hours (kWh) per month would be a decrease of $3.32.

Sounds good, yes? “Multiple factors” followed by a listing of “fuel, REPS, DSM, EE” in the rate changes. Gee, could maybe the massive renewable energy lobby’s talk about REPS being better for rates be, against all odds, actually correct?

No. Not at all. The rates would decrease despite, not because of, the state’s renewable energy policies, including REPS. Read on, Lizzy:

The main reasons for the proposed overall rate decrease involve fuel costs.

Total fuel costs projected for the upcoming year are declining due to a drop in commodity prices.

That would be a decline in the prices of natural gas and coal. These are helped by “Duke Energy Progress’ planned purchase of North Carolina Eastern Municipal Power Agency’s ownership share in certain generation assets.”

What about the rest?

Duke Energy Progress also filed for an increase in the charge to customers for the utility’s compliance with the state’s renewable energy portfolio standard (REPS).

As filed, the REPS charge would increase $0.34 per month for residential, $0.55 per month for commercial accounts and $36.29 per month for industrial customers.

Proposed increases to the REPS charge reflect increases in actual and projected compliance costs driven by the increase in the utility’s overall compliance obligation.

Duke Energy Progress has also filed to recover the costs of implementing programs designed to help reduce energy consumption and save customers money on their energy bills. Rates have increased primarily due to increased customer participation and related costs.

In other words, the renewable energy and energy efficiency policies are increasing in expense, counter to what their lobby is saying, even as traditional fuel sources are declining at a faster rate, which is also counter to what the renewable energy lobby has been peddling.

It’s another reason to be thankful for the shale revolution.

Here is how the Triangle Business Journal (in a rare article not pushing for expanding industry incentives — hail the change) explains it:

Overall fuel-related costs are going down $181.2 million, the utility says in its filings. That includes a $50 million adjustment for money Duke Progress over-collected from customers for fuel charges in the most recent period.

The fuel-related charges are based on forecasts of costs for fuels, environmental reagents and other specific items. At the end of each period, Duke Progress “trues up” the projected and actual costs.

The charges for the state’s renewable-energy requirements and the utility’s demand-side management programs will go up slightly. But those increases are more than offset by reduction in the fuel costs. …

Prices for coal, natural gas and other fuel-related commodities have generally been lower this past year, leading to the some of the reduction. Also, the assets of two nuclear and several coal plants Duke Progress is buying from the N.C. Eastern Municipal Power Authority have lower fuel costs that Duke Progress’ overall fleet. So the savings there will go to customers.

Jon Sanders / Research Editor and Senior Fellow, Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...