NC WARN calls for denial of annual rate hikes and current 18.6% request that would leave small customers paying twice the rate of energy-hogging data centers
Statement by Executive Director Jim Warren:
Duke Energy is seeking an 18.6% rate hike that would force residential electricity customers to subsidize the enormous energy demands of some of the world’s richest corporations, which Duke and Governor Perdue are aggressively recruiting into North Carolina. By promising cheap electricity – plus years of large discounts in rates – for data processing centers run by Google, Facebook, Apple and others, Duke Energy is penalizing residential and business customers while planning to continue raising their rates year after year.
Faced with falling long-term demand projections nationwide, Duke is recruiting these huge energy users in order to sell more electricity. But also, by driving up demand, the utility will try to justify its high-profit plan to build high-risk nuclear plants, while doubling the power bills of families and businesses through annual rate hikes – a trend that’s already well underway.
NC WARN is calling on the NC Utilities Commission to reject Duke Energy’s rate hike request. It is too high for any single year – especially during a prolonged recession and for those living on low and fixed incomes. Also, Duke’s plan unfairly penalizes residential consumers by using a highly discriminatory rate allocation method based on just one summer hour’s usage during a record-breaking heat wave in 2010.
During rate hike hearings beginning in Raleigh next Monday, NC WARN will bring an expert on data centers, Greenpeace International’s Gary Cook, to testify about inequities created by the influx of giant data processors seeking cheap electricity. In North Carolina, Apple, Google, Facebook and others are gobbling up hundreds of millions of state and local incentive dollars despite generating a very small number of permanent jobs and exporting their profits out of state.
NC WARN, the NC Justice Center and the NC Housing Coalition stand with the Public Staff of the Utilities Commission in urging the Commission to require Duke Energy to adopt a fair method of allocating rates among customer classes – one that does not penalize residential customers in favor of the state’s biggest power users.
The Commission must protect our economy from uncontrolled rate hikes. Duke plans to push the legislature to pass a bill next spring that requires ratepayers to pre-finance those new nuclear plants through automatic annual rate hikes. Those rate hikes would come atop the huge increases now being sought, plus one put into effect last year and another Duke has said it wants next year.
Duke Energy decides rates for each class of customers – residential, commercial, and industrial – based solely on just one hour when Duke’s electric load “peaks” because of extreme heat. During that single “summer peak” hour, most residential customers’ air conditioning boosts peak demand. Based on that one-hour snapshot, Duke allocates all its capital costs of power plants and transmission for the entire year, causing unfair rates for residential customers.
Homes use much less electricity the rest of the year, while most commercial and industrial customers – especially the likes of Google, Apple, and Facebook – use huge amounts year-round. But under Duke’s “summer peak” formula, those data centers’ year-round energy use is not factored in to allocating the costs of power plants and transmission.
This approach is simply unfair, as the Utilities Commission’s Public Staff – responsible for representing the public – has long argued. In Duke’s 2009 rate case, the Public Staff’s James McLawhorn testified that a method which considers customers’ year-round energy use “is the most fair and equitable allocation methodology overall for customers and most accurately reflects electric utility system planning.”
In the current rate case, Public Staff witness Jack Floyd explains how the biggest customers can “game” Duke’s current approach to reduce their rates: “As some customers can interrupt significant portions of their load during the summer coincident peak hour, use of the [summer peak methodology] would reduce the allocation of production plant costs for that class, despite having significant energy requirements from the utility’s generating plants for the remainder of the year. These cost burdens are then shifted to other customer classes.”
The Utilities Commission should require Duke to adopt the more equitable method used by the state’s other two big electric utilities, which allocate costs based on each customer class’s average year-round energy use, as well as the winter “peak.” This issue is timely because the data centers’ share of Duke’s demand is likely to grow exponentially and quickly. Cook, who co-authored the 2012 report, “How Dirty is Your Data?” summarized the electricity use and projected growth of data centers in his pre-filed testimony for NC WARN:
“Data centers … currently consume 1.5-2% of all global electricity, and are growing at a rate of 12% per year globally. The most recent estimates (2007) of the aggregate electricity demand of the data centers and the communications network needed to deliver data to the end user are … expected to triple in the next ten years. … Data centers electricity use grew nearly 60% globally from 2007 to 2010 in a horrible economy (40% in the U.S. alone).”
In 2010, Duke’s data center customers, including Google, paid on average about 4.6 cents per kilowatt hour (kWh) for electricity, while residential customers paid almost 9 cents. With Apple and Facebook eligible for 20% discounts on their bills this year, data centers’ average costs could go down, even as Duke is asking to raise the main residential rate to over 10.5 cents per kWh.
With Duke seeking to build two new nuclear plants at a likely cost of over $20 billion, the wealthy corporations driving the need for more “baseload” generation should at least be required to pay their fair share. While Duke might profit more from a data center that uses as much electricity as 80,000 homes, that consumption imposes multiple “externalized” costs on North Carolinians who subsidize the electricity discounts and tax credits the data centers enjoy.