December 9, 2010
Utility Forecasts Contradict Pervasive PR
Arguments for new nuclear, coal plants ignore years of flat growth, rising rates, and a restructured economic future
Statement by Director Jim Warren:
Durham, NC – Since early 2006, southern power companies have seared into the public mind the notion that electricity demand has grown unfettered for many years and will continue to do so far into the future. Public officials and others have adopted the “2% per year” growth mantra while echoing utility arguments for building coal and nuclear power plants so we can “keep the lights on.”
One problem: The 2% growth figure is a gross exaggeration and has been for many years. And it won’t even be approached for the foreseeable future – according to the utilities’ own data.
In North Carolina, the utilities’ PR line is belied by their elaborate Integrated Resource Plans (IRPs) filed most recently in September with the NC Utilities Commission. As the IRPs show, both Duke Energy and Progress Energy have experienced nearly flat growth in electricity demand for many years. And with each annual IRP filing over the years, both companies have lowered most of their successive projections of electricity needed far into the future.
Still, in public and private meetings, officials for both Duke and Progress continue to chant “growth‑growth‑growth” so they can justify gambling customers’ money on new power plants. Recently a representative of The Shaw Group – builder of large power plants – repeated the “2% annual growth” line several times at meetings of the Baseload Committee of the Energy Policy Council, on which I served, as Duke and Progress officials nodded their endorsement.
And despite years of low growth, ongoing restructuring of the national and state economies, and a certainty that soaring power bills from new nuclear plants would result in what regulators call “demand destruction” – where customers cut usage as power gets more expensive – in September both Duke and Progress told the Utilities Commission to expect vigorous growth far into the future.
Accurate and realistic forecasts matter. Here are the facts:*
- From the IRPs: Progress’s actual retail sales grew only 0.3% annually from 2000-2009, and Duke’s grew only 0.7% annually from 1994-2009.
- From the IRPs: The utilities’ sales projections have continuously decreased over the years.Between its 2005 and 2010 IRPs, Duke’s forecasts for peak demand in 2015 decreased by 20.4%, and during the same time, the projections for 2025 decreased by 2%. Between Progress’s 2005 and 2010 IRPs, the company showed no change in peak demand forecast for 2015, but it showed a 9.3% decrease in total sales in 2015.
- In its 2009 rate case, Duke adjusted earlier projections to reflect the impact its rate hike would have on customer usage. The revised estimates projected a slightly negative trend in retail sales over the next five years. And these projections were made in early 2009 – before the worst impacts of the current economic recession.
- From the IRPs: Duke and Progress officially project growth rates far below the 2% PR claim. Progress expects its retail sales of electricity to increase by 1.4% annually through its 15-year planning period. Duke is projecting 1.5% through its 20-year planning horizon. NC WARN thinks these are typically inflated. But even if accurate, the margin below the 2% claim means the need for building new nuclear plants vanishes.
The utilities might protest that NC WARN’s analysis excludes wholesale growth, and we agree this is an important factor. For several years Duke Energy has been recruiting new outside customers to compensate for low sales within its service area. Outside customers became the justification for building the Cliffside coal‑power plant on the financial backs and health of Duke’s North Carolina customers.
Now Duke is proposing to do the same with its Lee Station nuclear project, which would lead to huge rate hikes for North Carolina customers while jobs and tax base benefits would be created in South Carolina.
In the late 1970s, the utilities were hyper‑eager to build nuclear power plants, claiming huge growth in electricity sales forecasts. But Duke and Progress later canceled nine reactor projects underway in the Carolinas and soaked customers for $100s of millions in “stranded costs.”
Progress, Duke and their cohorts need to become honest by aligning their prodigious PR with their formal documents. As a member of the Energy Policy Council’s Baseload Committee, I presented the above numbers – without contest by utility officials.
As energy economist John Blackburn said, “North Carolina should not gamble billions of dollars based on past and future numbers showing in the IRPs, especially when we have better and cheaper alternatives that can be implemented much more quickly and with far less financial risk.”
* Analysis by Dr. John Blackburn, attorney John Runkle and Jim Warren