||As North Carolina regulators begins to recognize the untapped economic, social, and
environmental benefits of meeting increased electricity demand through energy efficiency,
it has become clear that traditional electricity rate-making creates a disincentive
to invest in energy efficiency. To encourage the use of energy efficiency, the North
Carolina Utilities Commission (NCUC) is investigating Duke Energyâs proposed energy
efficiency financing mechanism called Save-a-Watt (SaW). Through SaW, Duke Energy
can subsidize energy efficiency measures for individual ratepayers. These energy efficiency
measures reduce the amount of electricity sold to the individual ratepayers. To recover
subsidy costs and opportunity costs from reduced electricity sales, Duke Energy spreads
90% of the cost that it would have taken for the utility to generate the saved electricity
to all ratepayers.
This paper provides an analysis of the quantitative effect of Duke Energyâs proposed
Save-a-Watt (SaW) mechanism. Although Duke Energy has proposed SaW in many states,
this analysis will focus on Duke Energyâs North Carolina service territory. To evaluate
SaW, a cost benefit analysis of SaW was generated from a financial model of Duke Energyâs
operations. The financial model of Duke Energy was built from information gathered
from reports, financial and accounting statements, and North Carolina Public Utilities
documents. For the cost benefit analysis, two cases were simulated over a 25 year
period: the base case includes the construction of two 800 Megawatt coal power plants
and the SaW case includes one 800 Megawatt coal power plant and the rest of electricity
demand is met with energy efficiency investments.
The outcomes from the cost benefit analysis indicate that ratepayers, utilities, and
society would realize a positive net present value by implementing the SaW case rather
than the base case. In addition, minimal impacts to electricity rates were observed.
Due to the confidential nature of information related to the cost of electricity production,
some assumptions were made in order to complete the analysis. Future research by individuals
with access to Duke Energyâs confidential information should be done to verify the
findings in this report.