Duke Energy Gouges Ratepayers, Taxpayers

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Jim Rogers and windmill photoRather than big policies like cap-and-trade and federal tax credits, sometimes it’s the little ways that corporations snooker taxpayers and their own customers that really annoy the masses.

As has been well documented by NLPC, Duke Energy’s Jim Rogers has been a big advocate for levies on carbon dioxide emissions, government giveaways for renewable energy, and Democratic conventions.

Each example shows how the Charlotte-based utility is far more interested in gaming government regulations in its favor – keeping its bottom line and shareholder returns healthy – rather than delivery of its product efficiently and affordably, which is a better and more American way to maintain profitability.

This attitude of Duke and Rogers has manifested itself in two absurd situations in North Carolina. First is the revelation that Duke has a sweet contract with Charlotte that gives the utility nearly $10 per month to maintain and operate each of the 80,000 streetlights in the city – whether they work or not. According to local online publication PunditHouse.com, it’s not unusual for as much as 10 percent of the lights to be out of order, meaning that city taxpayers could pay nearly $80,000 per month for failed luminosity. Charlotte City Councilman Andy Dulin decried the agreement.

“We have been paying, for what might now be years and years and years, $9.90 a month for streetlights that don’t work,” he said. “On my walk this morning, I passed at least 10. This has got to be fixed – quick. This is nuts.”

It makes you wonder how many other cities have similar agreements with Duke (or other major utilities) to pay for power and lights that don’t work. Dulin noted that Duke, with its massive resources, ought to be able to employ technology that notifies the company when individual lights need replacement. Indeed, the energy behemoth prides itself on its ability to innovate on power generation technologies such as coal gasification and wind power storage. Dulin said, “There’s no incentive for them to use that technology if their customers aren’t going to speak up and say, ‘We’re not paying you for the lights that don’t work.’”

Regular readers of NLPC won’t be surprised that the Duke schmooze-masters are cherished as “good corporate citizens” in their hometown. The John Locke Foundation’s Charlotte-based reporter Tara Servatius explained:

Duke’s employee campaign fund and its executives have long histories of donating copious dollars to local politicians. If you are a local politician, it is simply understood that you don’t question Duke. So for now, taxpayers will go on paying to stay in the dark. And the most outrageous part? The city’s 311 call center handles the calls about non-working lights, not Duke, sparing them the need to run their own call center.

Jim Rogers and his minions know all the tricks about panning for government gold.

And now Duke is in the process of notifying its North Carolina customers about another wasteful exploit it wants them to pay for, in addition to a 17.4 percent rate increase it plans to inflict on its residential users. Not surprisingly the costly experiment is yet another effort to develop wind energy, after state legislators enacted a 2007 law that mandated both Duke Energy and Progress Energy (soon to become one company) to obtain 12.5 percent of their power generation from so-called “renewable” sources.

While Rogers has said that the wind investments his company has made produce between 17 percent and 22 percent return on equity, he just couldn’t make the Coastal Demonstration Wind Turbine Project pay off – not even close. So Duke wants the North Carolina Utilities Commission to allow it to collect $3.7 million over 12 months from customers to pay for its experiment, in addition to the overall rate increase.

It’s hard to believe Duke would not have known the coastal trial would have been a waste of time and money before it even dipped its toe in the water. The plan was to erect three wind turbines in the Pamlico Sound, inside of North Carolina’s Outer Banks, just west of Cape Hatteras. The test project was to “facilitate the state’s efforts to develop renewable energy sources by studying the feasibility of larger scale wind turbines in coastal waters,” with Duke required to pay for the turbines and their installation. Specifically researchers were to set up equipment on or near the turbines that would measure winds, temperature, precipitation, subsurface currents and wave activity. Additionally the project description called for “a radar system, acoustic monitoring, and thermographic and visual imaging equipment will detect bird, bat, fish and marine mammal activity and document the impact of the turbines on these species.”

But sometimes the costs of what always-buoyant eco-activists call clean energy “investment” are too much even for Duke and generous government subsidies to swallow. Claiming they never saw it coming, Duke said the price tag for the first turbine would be $88 million, and the second one would cost $14 million.

“The relatively high fixed cost of developing, permitting and installing the first turbine makes a small demonstration project much less cost-effective than a large-scale project,” the company reported in an August 2010 press release. “Additional challenges included the need to use modified shallow water construction techniques and a greater than expected potential of disturbing underwater vegetation.”

Translation: Environmentalists and their regulations killed their own pet project. But in the whole corporate socialism/government benevolence/enviro-activism nexus, there are no failures.

“The work completed on this project was successful in showing that North Carolina is well positioned to develop offshore wind generation, and we encourage state lawmakers to consider legislation to enable affordable large-scale wind generation off the coast,” said Paul Newton, senior vice president of strategy for Duke Energy’s franchised businesses.

Amazing! Even though no turbines or equipment were set up, and no test measurements were taken, the project was deemed a success and therefore politicians should pour even more money into new successes like it!

And Duke’s customers should just be thankful to pay $3.7 million through higher electricity rates for the privilege of supporting such worthwhile ventures. Right?

Paul Chesser is an associate fellow for the National Legal and Policy Center and is executive director of American Tradition Institute.