DURHAM, NC – A prominent statewide voice for justice is urging regulators to abolish Duke Energy’s rate-making system that “is heavily skewed against residential and small business customers” and favors rich corporations that create few jobs.
NC WARN filed a formal statement by Professor Gene Nichol, head of the UNC Center on Poverty, Work and Opportunity, last Friday with the NC Utilities Commission. In it, the veteran legal scholar supports the watchdog group’s earlier request for a stand-alone proceeding to examine how Duke Energy charges various customers for electricity.
In May, NC WARN petitioned the Commission to establish a docket to directly address – prior to upcoming rate cases – Duke’s allocation of costs. The group says Duke lures high-load data centers into the state with low rates and other incentives that are paid for by families and small businesses, and that Duke then uses the new energy demand to argue for building more power plants that are also largely charged to small customers.
NC WARN’s new filing is a response to Duke Energy’s motion opposing a separate proceeding.
Professor Nichol told the Commission, “NC WARN’s rulemaking petition will bring this concern before the Commission outside the context of a rate case, where the issue of fairness of cost allocation methods is often overlooked or settled before any serious broader inquiry is made.”
State law prohibits discriminatory rate structures. The Utilities Commission has twice rejected the “Summer Peak” method for allocating costs to rate classes that Duke is using, and the Commission’s Public Staff firmly opposes it. But Duke continues using the 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 Duke’s rate-making method.
The NC WARN filing also includes a statement by economist William B. Marcus, an expert on utility rate structures, who argues that Duke’s rate methodology is rarely used in the U.S. because it does “not result in fair or reasonable rates.”
NC WARN argues that Duke’s rate scheme is harming the state economy by causing small businesses to pay three times more per kilowatt hour, excluding fuel costs, than the “data centers” being drawn into North Carolina by Duke’s promise of low rates and other subsidies. These data centers provide very few permanent jobs.
In his letter, Professor Nichol told the Commission: “Residential customers in North Carolina are currently shouldering most of the burden of the enormous cost of providing electricity to high-load customers with sustained, year-round demand. As the Commission was created to serve the public interest and ensure fairness for all customers, it must reject a cost allocation method that results in the poorest customer classes subsidizing the power bill of heavily resourced multinational corporations.”
NC WARN’s May analysis of utility documents found that Duke sets its highest rates for residential users and 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. Furthermore, they argue, most big customers reduce their electric load during that hottest hour with generators and other methods – on cue from Duke – shifting even more costs to households and small businesses.
NC WARN told the Commission in May that “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.”