Duke Energy Struggles to Justify Risky New Power Plants
Utility is grilled at hearing over adding new customers outside its service area
Statement from NC WARN Executive Director Jim Warren:
DURHAM, NC – Attorneys for consumers, environmentalists and even a rival power company argued this week that Duke Energy is seeking a major shift in state policy so it can add outside customers and justify building new coal-fired and nuclear power plants. Under cross-examination at a NC Utilities Commission hearing, a Duke official admitted to NC WARN attorney John Runkle that it is soliciting at least nine cities and other large customers outside its service area.
For three years Duke CEO Jim Rogers has insisted he must build giant power plants because of enormous population growth in its service area. But if Duke gains a favorable Commission ruling, it would add outside customers whose electricity usage far exceeds the 800 MW capacity Duke is building at the hotly contested Cliffside coal-fired plant west of Charlotte. Ironically, in newly filed Duke documents, long-term growth projections inside Duke’s service area have been slashed.
Nevertheless, Duke is now attempting a 20th Century business expansion. It’s using public relations cover in the form of CEO Jim Rogers’ national professions* that he’s concerned about climate change and has innovative plans for energy efficiency. In fact, Duke’s new planning documents project less than 2% cumulative efficiency savings over the next 20 years.
If approved by the Commission, Duke will have stolen SC Electric’s largest customer, the City of Orangeburg. Moreover, the declaratory ruling sought by Duke would open the door for the energy giant to add wholesale customers from virtually any part of the U.S. without Commission approval.
As the opposing attorneys pointed out, Duke’s current retail customers – captive within the monopoly service area granted to Duke – would subsidize the new customers, who would a pay a lower-than-market rate and be shielded from financial risks posed by new nuclear and coal plants.
Thanks to the NC Legislature’s 2007 energy bill “gift” to Duke and Progress – among the lawmakers’ largest financiers – risks for the multi-billion dollar Cliffside plant and the Lee 1 and 2 nuclear reactors would largely be shouldered by retail ratepayers in the utilities’ service areas.
The Commission’s Public Staff and the NC Attorney General’s office both argued this week that Duke’s proposed twin Lee nuclear reactors are extremely dicey. The Public Staff questioned whether Duke could afford the project, in part due to ongoing design problems by reactor-maker Westinghouse. In a separate filing this week, Duke admitted that Lee’s cost estimate has doubled to $11 billion, excluding financing and cost escalation.
Corporate raiding: Progress Energy entered the case because Duke is soliciting the City of
Fayetteville, currently a customer of Raleigh-based Progress. It’s also likely that Duke is soliciting more outside business than revealed so that Rogers can justify the new plants and add billions to Duke’s Rate Base (on which profits originate). This could cause power bills for current retail customers to double or even triple, especially if cost overruns or cancellations plague the nuclear construction, as Wall Street lenders and other observers caution.
Progress attorney Len Anthony coaxed Duke President Ellen Ruff into acknowledging that plans for expanding outside customers began as Duke initiated planning for building the Cliffside and Lee baseload plants.
Duke officials say adding outside customers will spread the cost of adding over 20 billion dollars worth of new plants. But as pointed out by the attorney general’s office, Progress and NC WARN, without adding the new outside customers, so much new generation would not be needed. NC WARN and others point to calculations by Duke’s own experts which show that even moderate energy efficiency could avoid the need for new plants, and even allow existing coal-fired plants to be closed – a huge boost to urgently needed climate protection.
Rogers is increasingly out on a limb. He’s trying to build Cliffside and nuclear reactors to accommodate new markets, not to handle growth within his service area. In our fast-changing energy economy, that contradicts the PR painting him as visionary. Rogers looks increasingly like the corporate bosses who wound up cancelling scores of nuclear plants in midstream during the 1980s, a feat that Forbes magazine labeled “the largest managerial disaster in business history.”
* Rogers will appear soon on CBS 60 Minutes.