NOTE TO
EDITORS
January 22,
2007
Duke Energy uses dubious deadline to push
Commission –
despite coal plant’s latest price surge toward $4 billion
Summary of Three-Day (January 17-19, 2007) Hearings
Before the NC Utilities Commission:
Durham, NC – In a bid to salvage a wounded project
with a soaring price tag and widespread opposition, Duke Energy CEO Jim
Rogers closed out three days of hearings with an aggressive sales pitch
to the NC Utilities Commission late Friday. Duke’s senior officials
earlier admitted they could better determine price estimates for the
Cliffside plants – and the analysis that would prove them the best option
– within a few months. But Rogers, while frequently contradicting
himself, his senior officials and the facts of the case, pressed
commissioners to trust his professional judgment and rapidly approve the
two 800 megawatt coal burners. Key points from formal testimony and
cross examination:
Rising and Uncertain Costs: The latest cost
overrun was exposed on day one of the hearings after public interest
attorneys found that a $1 billion increase announced in December did not
include finance costs of the project that could send the price tag to $4
billion. Rogers’ pre-filed testimony also had stated the price tag as $3
billion, without mention of the finance costs. His officials admitted
those costs would be hundreds of millions, and that market forces are
creating substantial uncertainties about the costs of coal and nuclear
plants. Rogers said that if ever built, nuclear plants will cost 45%
more than prices cited by Westinghouse.
Questionable Deadline – Watch for More Hikes:
Duke Energy is aggressively pressing for swift Commission approval,
citing without support a February deadline to lock in contracts that
constitute only 25% of the total price. However, Duke admits that it
does not have firm bids on 75% of project cost items, but said the
corporation had tried to reflect anticipated increases in those items in
the latest total estimate. Duke has an incentive to provide low
estimates of those costs until after the Commission approves the
project. Also, Duke and its vendors all have reason to appear inflexible
regarding the February deadline. Casting further doubt on this rush for
Commission approval is the fact that Duke has not begun a months-long
public process to obtain a state air pollution permit. Construction must
await that permit, and presumably Duke would not commit to equipment
contracts worth billions of ratepayer dollars until that time. As to
Rogers’ warnings about NC running out of power, Duke admitted it plans to
build gas-fired peaking plants anyway, which could prevent any short-term
gap between supply and demand.
Uncontrolled Greenhouse Gases for Decades:
Despite Rogers’ aggressive public relations calling for climate
protection, he admitted he wants the two huge Cliffside plants exempted
from upcoming carbon regulations. If he were to lose that gamble, rates
will rise even more in the short run. Rogers believes there might be a
technology in 15 or 20 years to remove the greenhouse gases from the
smokestacks. An earlier witness for Duke said that if such technology is
ever developed, it would be extremely expensive.
Maximum Sales and Profits: Under cross
examination, Rogers claimed his only motivation is customer service,
insisting he had not even considered, nor knew the amount of, the key
financial benefits of the project for his corporation: the revenue
impacts of adding up to $4 billion to the rate base, along with a
guaranteed mark-up and profit. Are we to believe that Duke Energy’s
board of directors and financial managers never asked about the financial
benefits of the project?
Didn’t Consider Efficiency: Despite a public
posture assertively lauding energy efficiency (including a state
“stakeholder” process that Duke now says might be delayed until 2008
according to Duke’s Janice Hager), Duke didn’t include efficiency in any
modeled scenarios for upcoming electricity needs. Hager admitted the
corporation could complete the modeling to include efficiency and other
omitted factors within a few months and at low expense. But she insisted
that 101 megawatts (one-sixteenth of the Cliffside expansion) is the
total potential for efficiency over the next 35 years. Later, Rogers
boasted of his dedication to efficiency, but layered qualifiers over
various “commitments” to the Commission. A national energy efficiency
taskforce that Rogers co-chairs recently called for ramping up
power-saving programs in the next three years, but Rogers said his own
company cannot be expected to comply with that initiative.
Cliffside Fails the Least Cost Requirement:
After learning of the first billion-dollar overrun in October, within 24
hours Duke determined Cliffside is still the best option. It doesn’t
meet the “least cost” requirement under state law, but Rogers argued it
meets his “best cost” judgment. But with coal and nuclear costs
increasing at an uncertain rate, surely the Commission should
order Duke to model Cliffside compared to efficiency and renewable energy
– the costs of which are decreasing dramatically.
Customers to Take the Risk: Rogers made
clear that he wants Cliffside and all plants to fall under
proposed legislative changes that would force customers to pay up front –
plus a utility mark-up – for new plants, even if they’re cancelled and
regardless of cost overruns. He’ll promote “CWIP” as a way to reduce
finance costs, but in fact, it would only shift even more of the costs
and risks to the public.
A So-called Public Staff: Knowing his case
was in trouble, Rogers’ began his testimony to the Commission with an ad
lib thanking the Commission’s Public Staff for “supporting us” on the
expansion. Later, he admitted under cross examination that the Public
Staff – an agency that is supposed to be independent and represent the
public’s interests – had endorsed Duke’s plan before the hearings, i.e.
before listening to the debate, expert testimony, cross
examination and questions by Commissioners.
Late in his three-hours on the stand, Rogers’ true
colors trumped his $4 billion smile. His dramatic charm-laden
performance turned into a finger-pointing rant toward the environmental
attorneys, denouncing the five intervener groups for opposing new power
plants, belittling the advantages of clean energy, and serving notice:
“We intend to work with others to incent building large power
plants in this state!”
Rogers’ approach seems to be “damn the torpedoes.”
He talks about small, uncertain concessions to energy efficiency, largely
as public-relations cover for new plant construction. If he succeeds, it
will jeopardize the state’s economy, prevent the infusion of thousands of
clean-energy jobs, and continue a sorry record of corporate influence
over North Carolina decision-makers. No rational, democratic society
should allow such a course, which would also keep us speeding into the
abyss of climate change.
In the 1970s, the public warned the Utilities
Commission it should focus on energy efficiency, but it didn’t listen.
So the power companies wasted 100s of millions of ratepayer dollars on
plants that were never finished due to cost overruns and lack of demand.
The plants it did build caused an incalculable cost in health damage and
greenhouse gases. The Commission must not repeat that mistake, which
could lock this state in last century’s energy technology as much of
world moves ahead.
With billions of public dollars at stake and the
first large plant in 30 years, the commissioners should not let
themselves be bullied into moving ahead quickly without all information
needed for this vitally important decision. As Commissioner Jim Ervin
asked, “Why shouldn’t the Commission insist all the work be done?”
##
Advocating for the public interest were
attorneys for Southern Environmental Law Center, NC Sustainable Energy
Association, Environmental Defense, Southern Alliance for Clean Energy,
NC WARN, Attorney General’s office, Carolina Utility Customers
Association, and private citizen Wells Eddleman.
NC WARN PO Box 61051 Durham NC
27715-1051 919 416-5077 ncwarn@ncwarn.org
www. ncwarn.org
