Electricity rate increases proposed by Duke Energy would raise the University’s annual power bill by $3.5 million if approved by the North Carolina Utilities Commission, the University’s energy manager said last Thursday.
Duke Energy, once a major source of University founder James B. Duke’s wealth, has asked the commission to approve significant rate increases for its North Carolina customers. According to documents provided by Duke Energy, the proposal would see rates increase by 14 percent and 17 percent, for commercial and residential customers respectively.
A July article in the Charlotte Observer said this is the largest rate increase requested by Duke Energy in at least 20 years.
Duke Energy is one of the largest electric power companies in the country, serving 1.8 million customers in North Carolina, according to the Observer article. Its operations within the state are regulated by a public commission, which sets rates that allow the company to cover costs and return a certain amount of profit to its investors.
The university purchases all of its electricity from Duke Energy, and consumes about 460 million kilowatt hours each year, according to Energy Manager Steve Palumbo, who works in the facilities management department.
“We spend about $25 million annually on electricity,” he said. “We will absolutely be affected by the rate increases, if they go through.”
Palumbo said that if Duke Energy's proposal is approved as-is, the 14 percent rate increase would cost the university about $3.5 million annually. The university's electric bill is paid out of operating expenses, he said.
"We don't have a lot of options," he said. "We have to buy our power from them."
The NCUC is holding public hearings throughout Duke Energy's service area, including one in the Durham City Council chambers Nov. 2. According to the Observer, the hearings are a chance for Duke Energy customers to raise concerns about the financial impact the proposed rate increases would have, especially given the ongoing economic downturn.
Palumbo said the university has a good customer relationship with Duke Energy, and that his staff regularly communicates with representatives of the utility company.
“We’ve already had discussions [about the proposed rate increases] with Duke Energy," he said. "They know of our displeasure.”
Despite widespread efforts to conserve energy, the university's average electricity usage is up compared to previous years, Palumbo said. He attributed the increase to new construction, but said the university is more energy efficient than ever.
"We are up compared to the past because we are adding new buildings," he said. "We’re always looking at ways to reduce energy use."
Palumbo said a new chilled water facility, which produces cold water for air conditioning and refrigeration across campus, has helped the university save power compared to older systems.
"Central chilled water production is our single largest use of electricity, but the new plant has helped us reduce overall use substantially," he said.
Duke Energy is also in the process of obtaining regulatory clearance for its planned merger with Progress Energy, which has been approved by shareholders of both companies. As first reported by the News and Observer, the Federal Energy Regulatory Commission has raised questions about the possible anticompetitive effects of the merger.
The combined company, which would retain the Duke Energy name, would be the largest utility company in the country, with over 7 million customers.
The FERC found that new company would “have an unacceptably high level of market control, giving it too much power over electricity prices and too much control over who could access its transmission lines,” according to the News and Observer article.
Representatives of DUMAC, LLC, the investment company that manages the university’s endowment and pension funds, declined to comment on whether the university owns shares of Duke Energy.
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