Duke Energy Caves In to Pressure Groups’ Demands

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Rogers photoIn yet another ploy to overcome opposition to their merger, Duke Energy and Progress Energy agreed with environmental groups last week to a few million more dollars in payoffs for “clean” energy schemes, and to implement energy efficiency programs that would reduce customers’ electricity use by seven percent of retail sales by 2018.

The deal has been planned for months, and when approved by state and federal regulators, will create the largest investor-owned electric utility in the nation. Combined the companies serve residents and businesses in Florida, the Carolinas, Kentucky, Ohio and Indiana. Sierra Club, Environmental Defense Fund, Coastal Conservation League, Southern Alliance for Clean Energy and Southern Environmental Law Center all intervened in the hearings before the North Carolina and South Carolina utility regulatory commissions. The Federal Energy Regulatory Commission also must approve the deal.

NLPC reported in September that the environmental pressure groups – whose calling cards are threats through lobbying and litigation – made the baseless allegation that the new Duke Energy would produce more pollution as a merged entity. The organizations feigned ignorance to the fact that Duke CEO James Rogers has made environmental regulation and the gaming of clean energy tax breaks and subsidies a major profit-making center. Appeasing environoiacs is part of his business strategy, to the point where Duke has spent billions on an unproven technology in Edwardsport, Ind., to build a coal gasification power plant that will capture and store its carbon dioxide emissions.

Nevertheless the Green groups put up an expert to make the case that all the (alleged) new pollution from the merger must be mitigated. Richard Hahn of La Capra Associates testified to the North Carolina Utilities Commission, “one way to mitigate the increased reliance on coal generation is for the Commission to condition approval of the merger on additional use of cleaner resources such as wind, solar or energy efficiency.” This is despite the fact that just a few years ago, La Capra argued in a report to the N.C. Environmental Review Commission that solar was a bad idea, “because the technology is expensive and not considered feasible on a commercial scale without substantial subsidies,” The News & Observer reported at the time.

But money is no object when it comes to gouging the utilities and ultimately, their ratepayers. In addition to the demands of the environmental groups, the N.C. Sustainable Energy Association wanted $75 million, and the anti-nuclear N.C. Waste Awareness and Reduction Network wanted $270 million, to be paid by Duke into weatherization programs, which are often scandal-ridden and wasteful. Duke had already promised to pay $15 million for such initiatives to try to gain support for the merger. 

That spending is considered inadequate to groups like Environmental Defense and Southern Environmental Law Center. Under the agreement with Duke, the utility agreed to the energy efficiency goals, to retire older coal-fired power plants in the Carolinas, and to pay $2 million to Palmetto Clean Energy, Inc., a South Carolina nonprofit organization that promotes the use and purchase of wind and solar power for the electrical grid. The payment to Palmetto would be a windfall for the organization, as it only took in $102,000 from 2008 to 2010. Palmetto is paid via collections of monthly $4 elective contributions by the utilities’ customers who want to pay for the development of renewable energy through their electric bills. That the organization has collected such a paltry sum illustrates how most consumers – at least in South Carolina – don’t want to pay extra for inefficient, expensive wind and solar energy. But now the $2 million cost will be forced on them, as they will have to pay Duke Energy for it in their regular electric bills. 

The agreement also advances the larger strategy by environmental activists to stop utilities’ usage of coal – the cheapest, most efficient, and most widely available source – to generate electricity. They oppose natural gas and nuclear also, but right now the elimination of coal is their highest priority. Taking those power plants offline in favor of wind and solar, which are intermittent and cannot handle baseload demand, will also drive up electricity rates.

And then there are the energy efficiency schemes. The News & Observer of Raleigh reported, “To achieve the additional savings, Duke and Progress would offer their customers financial incentives to buy high-efficiency appliances and to encourage customers to participate in other conservation programs.” In other words, that will be another reason for the utility to charge higher rates for all customers, in order to pay for the reallocation of revenues to those who behave the way environmentalists want them to.

“These are smart, practical business decisions that help position Duke Energy to meet pending environmental regulations and lower consumer costs,” said Greg Andeck, manager of Environmental Defense Fund’s Utility Initiative.

Andeck does not speak the truth. Duke is seeking a 7.2 percent (down from 15 percent) increase in electricity rates in North Carolina, in part due to environmental compliance demands. And electricity rates nationwide have skyrocketed since 2006 (as President Obama promised before he was elected), with households paying increases greater than the inflation rate for five consecutive years, according to a USA Today analysis of government data.

“Electricity is consuming a greater share of Americans' after-tax income than at any time since 1996 — about $1.50 of every $100 in income at a time when income growth has stagnated,” the newspaper reported.

Rates are increasing nationwide due to the unnecessary retirement of many older power plants, many of which have been improved with scrubbers to contain more harmful pollutants than in the past. Meanwhile environmentalists obstruct the construction and permitting of new coal plants.

It’s the redistributionist nexus of environmental activism, monopolistic utilities and government regulation, where businesses are incentivized to produce less of their product and citizens are forced to pay more for diminished quantity and quality. It makes no sense in capitalist America, but it’s made to order for Greenies, crony capitalists and power-hungry bureaucrats. God, help us.

Paul Chesser is an associate fellow for the National Legal and Policy Center.