The South Carolina Public Service Commission on Jan. 8 asked Duke Energy (NYSE: DUK) to respond to a complaint by the North Carolina Waste Awareness and Reduction Network (NC WARN) that Duke Energy Carolinas and Duke Energy Progress are maintaining more power generating capacity than they need to fulfill customer commitments.
Said the complaint filed with the South Carolina PSC on Jan. 5: “NC WARN has filed a complaint with the Federal Energy Regulatory Commission (FERC) requesting investigation of the practices of Duke Energy Carolinas and Duke Energy Progress that lead to excess electric generating capacity and waste. This complaint should be applicable and of concern to other utilities and ratepayers in the Southeast region, and therefore should be of concern to your commission.
“It is our belief, given the high reserve margins in the Southeast regions reported annually to NERC, the clear lack of projected power purchases in North Carolina utility IRPs, and the new plant capacity that is projected to be added throughout the Southeast in the near future, that there is a tremendous potential for waste and unjust and unreasonable costs to Southeast ratepayers.
“While FERC has repeatedly stated their position that utilities’ participating in regional transmission organizations (RTOs) provides numerous overall benefits to customers and the reliability of the electric grid, Southeastern utilities have taken no initiative to form or join RTOs themselves. For these reasons, NC WARN is calling on FERC and utility commissions to take such an initiative and to commission a study that further examines the possibility of Southeast utilities participating in RTOs.”
NC WARN is a not-for-profit corporation under North Carolina law, with approximately 1,000 individual members and families across North Carolina, most of whom are customers of the two Duke Energy subsidiaries.
Said the NC WARN complaint filed with FERC: “Duke Energy has failed to adequately comply with Commission Order No. 1000 and related Commission orders and policies by not effectively connecting its transmission system with neighboring utilities, such as Dominion Power, the Southern Company and the [Tennessee Valley Authority], which also have capacity in excess of planned reserve margins. The excess capacity throughout the Southeast region can and should be used among the various utilities to supplement each other’s generation requirements, rather than to duplicate the waste of unneeded or underutilized generation. Duke Energy’s excess and redundant capacity in North Carolina is not an anomaly but is apparent in Duke Energy’s other state jurisdictions, especially in Florida.
“The excess capacity within the Duke Energy territory, as well as in the entire Southeast is demonstrated in the North American Electric Reliability Corporation’s (‘NERC’) ‘2014 Summer Reliability Assessment.’ NERC defines reserve margins as ‘unused generating capacity at the time of peak load as a percentage of expected peak demand,’ and encourages utilities to plan for adequate reserve margins, especially during peak periods. The attached summary of the study, ‘NERC’s Summer Reliability Assessment highlights regional electricity capacity margins,’ shows excess capacity throughout the SERC Reliability Corporation. In the study, SERC-East (the Carolinas) had reserve capacity during peak periods of 24%; SERC-North (primarily TVA), 26%; and SERC Southeast (primarily Georgia and Alabama), 37%. The separate Florida Reliability Coordinating Council had reserve capacity of 29%. The resulting total for Southeast is much greater than the NRC reference margin of 14.8%.
“The ongoing failure to reduce excess capacity through transmission and generation planning and cost allocation leads to waste and unreasonable and unjust rates, most of which is caused directly by new plant construction. Duke Energy has received authorization from South Carolina to construct a 750 MW combined cycle generating plant near Anderson, South Carolina. As demonstrated in its annual integrated resource plans (‘IRPs’) for DEC and DEP, Duke Energy intends to construct 2,234 MW of new nuclear units in 2024 and 2028, and additional 5,048 MW of natural gas plants beginning in 2020. Recently, a 475-MW merchant natural gas plant was granted a certificate of public convenience and necessity in Duke Energy’s North Carolina jurisdiction. Similarly, surrounding utilities have new units planned or currently under construction. Most notably are the new nuclear reactors under construction, Plant Vogtle in Georgia by the Southern Company and the Summer Nuclear Generating Station by South Carolina Electric & Gas and others.
“There are no compelling reasons why each utility should continue to construct new generation without looking at mutual purchasing agreements. Duke Energy is only able to implement such wasteful practices in North Carolina because it has a monopoly service area covering almost all ofthe state. Rather than investigating regional strategies, Duke Energy continues to plan for new generating plants. In its IRPs, Duke Energy is planning on purchasing only .2% of its capacity needs in 2029 (down from the current 3%). This is directly counter to Commission directives in Order No. 1000 and other orders demonstrating the benefits of regional strategies and utility efforts.”