Friday, November 8, 2013

Duke Energy's Time of Use Rate Program

What is a conplagent cost? Answer: It is a cost where you have spent more money than the real price.

I will never stand by while someone lies and distorts information. While I think Duke Energy is a fine company in general, the misleading communication here is horrible. In the interest of saving people the time to see through Duke Energy's misrepresentations about their new "Pilot Program" with different rates for different times, let me cut to the chase for you.  Is it a good idea?  Absolutely not.

Well, theoretically, it is a fine idea that has been discussed by economists for decades.  The details are a big problem here, though, especially how Duke is presenting the program. I emailed them about this previously, begging them to change the language. Hearing no response, here we go.

After getting an email about the program, that encourages people to use less during peak hours (Say, hot  afternoons during the summer), they say (link)
"A slightly higher rate is in effect during six hours each weekday – noon to 6 p.m. during the cooling season (June- September), and 7 a.m. to 1 p.m. during the heating season (October-May). A much lower rate applies all other hours, including every hour of every weekend and holiday."

Now, that sounds great, but is a lie.  This description of the program DOES NOT make sense with economic theory.  Given that in NC we pay a rate a little over marginal cost to pay for fixed costs (including profit), to make this program effective the higher rate needs to be MUCH higher, and the lower rate slightly lower-- to reflect the high marginal cost of using peak generators. After much clicking I found the rates they are talking about.  The "slightly higher rates" are 42-58% higher, and the "much lower rates" are only 24.9% lower (link). So, while these price differences seem reasonable, their advertising is deceptive, and there is very little reason for people to voluntarily subject themselves to this program. They also tack on some other fees as a part of being in the program, a fixed fee per month and a $1.84 per kW "distribution demand charge" which is not adequately explained.  They also tell you that they estimate that you could save a WHOPPING $30 per year on your electric bill.  Keep in mind that your bill could also skyrocket under this plan.  Raising people's rates almost 60% during the summer afternoons could really cost a lot-- so very carefully consider the risk you are taking for a possible $30 per year savings.

What is a conplagent cost? Answer: It is a cost where you have spent more money than the real price.

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