Duke Energy under fire over controversial N.C. efficiency program, alleged Ohio kickbacks

It's been the sort of week that probably makes Duke Energy chief Jim Rogers feel he's earned his $9.9 million annual salary, what with all the trouble he's had to deal with.

Yesterday the chairman, president and CEO of the Charlotte, N.C.-based energy giant appeared before the North Carolina Utilities Commission and faced a grilling over his company's proposed Save-a-Watt energy efficiency initiative. The voluntary program would offer interested customers financial incentives to buy energy-efficient appliances and to take other steps to reduce energy consumption. But all Duke customers would finance the initiative through their monthly bills -- including low-income families who couldn't afford the more costly appliances even with incentives.

Opponents of Save-a-Watt -- which include church groups, environmental organizations, consumer advocates, businesses, municipalities, and the state attorney general -- point out that the program would cost Duke's customers more than any other efficiency program in the nation while providing only a small fraction of the energy savings. Other U.S. utilities and municipalities operating energy efficiency programs average 11 percent efficiency, but Duke's Save-a-Watt anticipates only a 1.8 percent savings by 2015 -- at which time the savings would begin to drop.

At the same time, the program would provide unusually generous financial rewards to Duke. The commission's Public Staff has estimated that Save-a-Watt would earn a 61 percent return for the company, which would collect $18.23 for promoting an energy-efficient light bulb that retails for $1.65. Under examination yesterday by Assistant Attorney General Len Green, Rogers acknowledged the program would produce a 35 percent to 40 percent return after corporate income taxes, which the CEO described as "an appropriate incentive." The Public Staff has suggested a return of 6.8 percent would be more appropriate.

Duke appears to be growing increasingly desperate to defend Save-a-Watt from its critics. The company's attorneys have approached some of the program's opponents to try to negotiate compromises. In addition, Rogers made a surprise announcement at yesterday's hearing, saying Duke would be willing to plow profits back into the program for several years.

But at least some of the opponents are unimpressed. "Save-a-Watt is not about saving energy," said Jim Warren of the N.C. Waste Awareness and Reduction Network, one of the groups formally opposing the program. "It's a P.R. cover so Duke can keep building power plants."

Meanwhile, N.C. WARN and the other Save-a-Watt opponents offered up their own surprise yesterday: They filed a motion with the Utilities Commission to establish an independently administered energy efficiency program in North Carolina they're calling NC SAVE$.

"You have heard about Robin Hood -- Duke's Save-a-Watt proposal is the 'hood getting robbed," Rev. Melvin Whitley of ACORN's Durham, N.C. chapter said at a press conference announcing the proposal. "We need an independent energy efficiency nonprofit such as NC SAVE$ to protect the poor."
 

Meanwhile, Duke Energy reached an out-of-court settlement over the weekend with a former employee who claimed he was fired after raising concerns about legally murky payments the utility made to some of its biggest customers in an effort to discourage them from opposing a rate hike in Ohio, the Cincinnati Enquirer reports.

John Deeds, the former employee, filed a lawsuit in 2005 accusing Cinergy -- which Duke acquired that same year -- of retaliating against him for questioning the legality of secret deals the company signed with 22 large customers including Procter & Gamble, AK Steel, General Electric and others. Duke paid those companies a total of about $22 million a year between 2005 and 2008, according to the paper.

Duke had tried to conceal the identities of the companies, arguing that the deals contained trade secrets. The Public Utilities Commission of Ohio also refused to fully disclose the contracts, but a judge last week ordered their release after The Enquirer asked for them.

While Duke Energy has said the contracts were legitimate "option agreements" to keep it from losing big customers to competitors, Deeds and others have called them "sham" transactions that broke Ohio's law against utilities paying rebates to one group of customers at the expense of another. The rate hike in question boosted Duke's residential power costs by around 30 percent.

The contracts are still the subject of a federal class action lawsuit that claims the payments were kickbacks Duke/Cinergy made in exchange for the companies agreeing not to oppose the rate increase.

The CEO of Cinergy at the time the secret deals were made?

Jim Rogers.