Duke Wants New Fee on Customers Who Opt Out

Regulators might undermine city proposal

In a move almost as confusing as its monthly bills, Duke Energy has proposed a 10-year rate plan that would impose a new “capacity” fee on both its own customers and those who have switched to other electricity providers.

While the Public Utilities Commission of Ohio (PUCO) evaluates the proposal, Cincinnati residents are considering an unrelated ballot measure that would enable them, as a group, to take their business away from Duke and give it to a lower bidder.

Under Duke’s proposal, its customers would now find their energy charges “unbundled” into two components: The cost of generating energy, which only they would pay for; and also Duke’s more hypothetical “capacity” to generate energy, which everyone on the local grid would subsidize through the proposed fee.

To make this change more palatable, the plan would also allow Duke to sell power on the open energy market, and share those profits with its customers. 

But households which now buy their power from competing Certified Retail Electric Service (CRES) providers, although they still pay Duke to deliver and measure their energy, would not partake of the profits.

Duke says that its average customer would see his or her monthly bill rise by an initial $4.  

But Keith Trent, president of commercial business for the multi-state Duke Energy Corp., told investors in June that “for switched customers the pricing impact would be more significant than for those who have not switched.”

Understanding the plan’s “capacity charge” can be perplexing.

James Ziolkowski, a rates manager for Duke, describes “capacity” simply as “the hardware on the ground, the power plant.” 

He says the capacity charge would help pay for required environmental upgrades to plants, among other things.

Critics have accused Duke of trying to shift the costs of maintaining its plants onto the customers of competitors. 

But the company says there are reasons for sharing those costs.

Ziolkowski suggests that Duke could power all Cincinnati households, either directly or indirectly, by becoming the main energy supplier to local CRES providers.

But nothing would force CRES providers to buy energy from Duke. 

And if they continued to buy or generate it elsewhere, their customers would be paying for Duke’s capacity without using it, under the current proposal.

Ziolkowski acknowledges that this presents a glitch. 

“What we don’t want is customers to pay twice for capacity,” he says.

Duke spokesman Paul Flake explains the capacity charge in terms of a different factor: PUCO’s requirement that the company shield consumers from “wild price swings” in the energy market.

“It is designed,” he says, “to compensate Duke Energy Ohio for providing a reliable and adequate supply of capacity to all of its customers over the extended term of this proposed plan.”

In 1999 Senate Bill No. 3 cracked Duke’s regional power monopoly, and in 2008 Senate Bill No. 221 laid out detailed requirements for cleaning the state’s energy pool.

Duke has been meeting its annual requirements for harvesting renewable and solar energy, and it recently announced future plans to shut down two dirty coal plants built over 40 years ago — New Richmond’s Beckjord plant and North Bend’s Miami Fort Unit 6.

But as recently as 2009, an EPA report revealed that Ohio’s power plants were generating the highest levels of toxic air pollution in the country.

And a 2010 study paid for by the national Clean Air Task Force found that Ohio had the second highest number of deaths “attributable to the fine particle pollution from power plants.”

That study attributed 200 human deaths to the two coal plants within 25 miles of Cincinnati.

Meanwhile, the Nov. 8 ballot will give Cincinnati residents the chance to form a “community buying group” to get the best local energy rates. As a regulated utility company, Duke wouldn’t be able to bid on the city’s contract.

Individual customers would be free to opt out and use any provider — including Duke — but they might be unlikely to do so, as several CRES providers currently charge residents between 15 percent and 30 percent less than Duke.  

If Cincinnati follows the lead of the nine other Hamilton County communities which have already formed buying groups, residents’ energy bills likely will drop.

But if the PUCO accepts Duke’s proposal, residents may still end up paying for Duke’s power plants, long after they’ve stopped buying the company’s energy.