Duke Energy seeks pay for less usage

By Lisa Lee

NEW YORK (Reuters) - Duke Energy (DUK.N: Quote, Profile, Research, Stock Buzz) wants to change the model for the incentives now used to reduce electricity demand so that power companies get paid when customers use less electricity.

"We are specifically involved in promoting and pushing a regulatory change, really a paradigm shift," Keith Trent, chief strategy, policy and regulatory officer for Duke Energy, told the Reuters Global Environment Summit in a telephone interview.

"We call that our save-a-watt model," he said.

Duke Energy is backing a plan in which power companies would be rewarded for driving energy savings similar to the way they now benefit from building new power plants.

"The beauty of the save-a-watt model is that it treats energy efficiency like a fuel source," Trent added.

The company has filed for approval for its energy efficiency model with Carolina state regulators. It intends to file with Indiana authorities later this month, Trent said, and anticipates making similar filings in Ohio and Kentucky.

If approved in all five locations, the company projects that it could avoid building 6,200-megawatts of generating capacity by 2017, Trent said.

Duke would not disclose the amount it would spend on building 6,200 megawatts. The company is asking state regulators to approve a proposal for it to receive 90 percent of the cost it would have spent to build new power generation.

Industry benchmarks estimate construction cost of $1,500 to $2,000 per Kilowatt for traditional coal-fired plants, and between $2,500 to $3,500 per KW for cleaner coal-fired plants and nuclear reactors.

Currently, utilities such as Duke earn returns from spending capital on power plants. To meet electricity demand, state regulators approve new generation build and increase the company's rate base to compensate for the investment.

"Right now we are incented to sell electricity. It actually hurts us to sell energy efficiency," Trent said.

Duke, which is also planning to build a traditional coal-fired power plant in North Carolina, is pushing energy efficiency as one of the key fixes, along with new nuclear, to address climate change.

Coal-fired plants generate one-half of U.S. electricity but are also the major cause of carbon dioxide emissions, the main greenhouse gas blamed for causing global warming.

Initially, independent third parties will use a variety of techniques such as surveys to gauge whether Duke is actually driving down electricity use. Later, real-time measures could come on-line that would better assess energy savings.

"We only get paid when those savings are actually verified," Trent said.  Continued...