Aug 20 - The News & Observer

Even before North Carolina regulators rule on Duke Energy's Save-a-Watt proposal, it's increasingly apparent that the controversial conservation program is endangered as originally proposed.

With contentious public hearings at the N.C. Utilities Commission winding down Monday, Duke officials acknowledged they've reached out to Save-a-Watt critics in confidential settlement talks, in effect publicly announcing that the company is willing to compromise.

Save-a-Watt hit a united front of opposition from church groups, consumer advocates, environmentalist organizations, Wal-Mart and the City of Durham, as well as the state's consumer protection agency, known as the Public Staff. Not a single organization entered the case on Duke's side.

The lopsided debate in this state may have tempered Duke's aspirations for Save-a-Watt and influenced company decisions in other states where the utility operates.

In the Midwest, Duke is proposing versions of Save-a-Watt that are much less profitable for shareholders, addressing some of the concerns raised during the North Carolina hearings. Critics here charged Save-a-Watt would gouge customers, reward shareholders and deliver negligible energy savings.

In Indiana and Ohio, for example, Duke has offered to cap its earnings on Save-a-Watt and to refund excess profits to customers -- provisions absent from the North Carolina version of Save-a-Watt.

Lawyers involved in confidential talks in this state won't discuss details. South Carolina's consumer advocate said regulators in all states are monitoring developments to gauge how far Duke is willing to concede on Save-a-Watt.

Duke defended Save-a-Watt in public hearings in South Carolina in February, but regulators in that state have delayed making a decision more than six months as long as Duke proposes variants of Save-a-Watt in other states.

Duke operates in five states, including the Carolinas. The utility is trying to comply with conservation laws designed to curb greenhouse gases and decrease reliance on major power plants.

"If Duke enters into settlements in other states that are more favorable [to consumers], I believe Duke would prefer to have similar conservation programs in other states," said consumer advocate C. Dukes Scott, executive director of the S.C. Office of Regulatory Staff.

The N.C. Utilities Commission is expected to rule on the Save-a-Watt proposal this year.

The Indiana version of Save-a-Watt, a compromise publicly proposed Friday, offers a hint of what negotiators could be discussing here. In Indiana, Duke has agreed its return on program costs won't exceed 15 percent.

The North Carolina version of Save-a-Watt, lacking a cap, would yield Duke an equivalent 37 percent return, after taxes, according to an analysis by the Public Staff.

Efficiency advocates say Duke could forestall the need to build new power plants with an aggressive conservation program. Duke officials counter that utilities need greater financial rewards to pursue conservation programs as an alternative to building new power plants.

Under Save-a-Watt, Duke would offer financial incentives to encourage customers to buy energy efficient upgrades for homes and businesses. All customers would pay for the program through their monthly utility bills.

The confidential talks in this state also could be addressing another point of contention: Critics want Save-a-Watt to deliver greater energy savings. The Public Staff has said that Save-a-Watt proposes to reduce customers' electricity use by only 0.23 percent annually from 2009 through 2012 -- puny compared to leading energy-efficiency programs that cut electricity use by 1 percent a year.

Participants in the talks include the Public Staff, N.C. Attorney General, Southern Environmental Law Center, and the N.C. Justice Center representing AARP, Legal Aid of North Carolina and the N.C. Council of Churches.

john.murawski@newsobserver.com or (919) 829-8932