The "Fifth" Fuel

Last May, Duke Energy floated a facinating proposal to the NC Utilities Commission. In it, they suggested that they would promote energy efficiency as a "fifth fuel" by sponsoring education programs and providing subsidies for the purchase of more energy-efficient appliances and devices.

So far, so good. Where it gets weird is in the reward Duke sought for being virtuous: a new fee (starting at $15 per customer per year) that would compensate the utility for the electricity it didn't sell because of decreased demand. That fee was based not only on program costs or unsold wattage, but also on the cost of the power plants the utility would have had to build if customers didn't conserve.

That's not how Duke Energy phrased it, of course: Duke Energy's spin was that they would be generously allowing consumers to save 10% of the cost of producing and supplying the energy they didn't use. But turn that around, and you see what's really going on: Duke essentially wanted to sell this "fifth fuel" - ghost power produced by ghost plants - for almost as much as they sold real power produced by real plants that they themselves built. That's a neat trick!

You would think that Duke Energy was trying to head off any attempt by the Utility Commission or the General Assembly to "decouple" electricity rates - that is, to set in place a system whereby utilities receive a set revenue even if demand decreases. This is usually done by promising to increase the profit the utility receives for each unit sold - provided that the utility actively promotes conservation and efficiency. Such increases almost never include the costs of building new plants, however, so you've got to hand it to Duke Energy for trying to widen the range of the debate.