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Duke Energy Rigs Rates against Small Businesses and Families

Legal challenge filed against expansionist business model that gives huge breaks to “No jobs” Apple and Facebook by driving up rates on small customers for years to come

DURHAM, NC – A watchdog group says Duke Energy is fueling demand for expensive new power plants by offering rock-bottom rates and other subsidies to energy gobbling data centers while shifting costs onto North Carolina’s small businesses and families – in violation of well-established case law. Following two controversial rate hikes since early 2010, and with three utility rate cases planned this year, NC WARN today called for state regulators to abolish Duke’s unfair rate system.

The group says Duke Energy is harming the state economy by causing small businesses to pay three times more per kilowatt hour, excluding fuel costs, than Apple, Google and other “server farms” being drawn into North Carolina. And they say the problem is poised to get much worse.

NC WARN today released a report called On the Backs of Families and Small Businesses: Duke Energy Carolinas Justifies New Power Plants by Giving Breaks to the World’s Richest Corporations. Attorney John Runkle filed the report as part of a petition calling for the NC Utilities Commission to conduct a rulemaking process that will “replace the unfair and outmoded” Summer Coincident Peak cost allocation method “with one that is fairer to all ratepayers.”

The watchdogs’ analysis found that Duke Energy justifies its highest rates for small businesses – and lowest rates for the biggest users – by allocating all costs related to generation of power based only on the single hottest hour of the year, when homes and small businesses are running air conditioning. No consideration is given to the high power usage year-round by the data processing and storage centers, which use up to 80,000 times more electricity than the average home.

Even worse, most big customers reduce their electric load during that hottest hour – on cue from Duke – shifting even more costs to households and small businesses, according to utility documents analyzed by NC WARN. In addition, Duke assigns millions of distribution and overhead dollars by the mere number of customers in a rate class – regardless of how much electricity the customer uses. So Apple and Google pay the same dollar amount of those costs as a retired apartment renter or small retailer.

“Duke Energy is selling out its home state with this new scheme to boost sales and build expensive power plants on the backs of small businesses,” said NC WARN director Jim Warren today. “CEO Jim Rogers has apparently promised Apple it won’t have to share the risk of building giant nuclear plants, and that Duke will keep its giant coal-burning fleet going for decades despite our rapidly heating planet.”

If Duke is required to adopt a balanced allocation method, it could be a major blow to the utility’s aggressive practice of recruiting high-using customers into the Carolinas, and of going far outside its service area to sign up entire blocks of power users.

NC WARN says the largest data centers create only 10 jobs per average work shift, so “this so-called economic development is harming our state economy by driving up the price of every product and service that relies on electricity, without even producing jobs,” added Warren.

The report asserts that “State law strictly prohibits such discriminatory rate structures,” that the Utilities Commission twice rejected the method Duke is using – in rulings standing for 20 years, and that the Commission’s Public Staff firmly opposes it. Also, Attorney General Roy Cooper’s utility expert made clear in a 2009 rate case that Duke’s method “does not consider, in any way, the extent to which customers use these facilities during the other 8,759 hours of the year …”

But Duke continues using the Summer Peak method because its rate cases in 2009 and 2011 were settled with the Public Staff prior to full-blown evidentiary hearings, thus the Commission did not revisit its 20-year rejection of Summer Peak.

That’s why attorney John Runkle today said the Commission must address the allocation method in a separate proceeding. “After our intervention in the last Duke rate case, we became even more convinced that the only way to get fair rates is to reform the way the rates are set.”

The report says “Duke’s rate method will impose most of the costs of building $20 billion-plus in new power plants on Duke’s captive residential and small-business customers, whose needs could be met more cheaply with energy efficiency, cogeneration and renewable energy.” Also, increasingly extreme summer temperatures exacerbate the unfairness of Duke’s method, as does Duke’s promise of more “peak shaving” and special deals for large customers, forcing more and more costs to homes and small businesses.

Warren added today: “North Carolinians hope Apple and the others will genuinely be good corporate citizens – although they have no allegiance here – and not join Duke Energy in exploiting our other fine businesses and families.”


NOTE: This rate allocation controversy is separate from the equally controversial “annual rate hikes” bill where Duke seeks to shift nuclear power construction risks to the ratepayers.

See the report: On the Backs of Families and Small Businesses: Duke Energy Carolinas Justifies New Power Plants by Giving Breaks to the World’s Richest
Legal Motion for Allocation Method
Report Summary

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