Duke Energy Updates Plan To Meet Growing Customer Power Demand In The Carolinas - Duke Energy

News Release
Nov. 29, 2006

Duke Energy Updates Plan To Meet Growing Customer Power Demand In The Carolinas

  • Duke Energy believes Cliffside modernization project is in the best long-term interest of customers and is key element in a portfolio approach to meet demand.
  • Company willing to invest $50 million in energy efficiency and retire older coal units.

CHARLOTTE, N.C. – Duke Energy Carolinas has filed supplemental testimony with the North Carolina Utilities Commission in connection with its application for a Certificate of Public Convenience and Need (CPCN) to build two new state-of-the-art coal units at the Cliffside Steam Station. The testimony incorporates the project’s most recent cost estimate of approximately $3 billion into the company’s integrated resource planning (IRP) analysis.

The testimony supports moving forward with the Cliffside Project and asks the commission to approve the CPCN necessary to proceed with construction.

“There is no question that energy demand is growing in the Carolinas. We add 40,000 to 60,000 new customers annually,” said Duke Energy Carolinas president Ellen Ruff. “This translates into an additional 2,120 megawatts of new capacity needed by 2011 and 6,120 megawatts needed by 2021. To put this in perspective, we built our current generation fleet of approximately 20,000 megawatts over the past 100 years.”

“Based on customers’ growing demand, we must increase the size of our generation system by one-third over the next 15 years,” Ruff added.

The Cliffside project is part of a portfolio approach to meet customer needs, which also includes natural gas, nuclear, renewable energy and energy efficiency. In the testimony, Duke Energy Carolinas addressed a willingness to spend one percent of annual revenue – approximately $50 million – on energy efficiency investments. Specific programs would be determined through the company’s ongoing collaborative stakeholder process, and would require the assurance of appropriate regulatory treatment. For every megawatt saved by new efficiency programs, Duke would retire an equivalent amount of older, less efficient coal generation in the Carolinas.

NOTE TO EDITORS: The following are excerpts from the testimony filed today with the North Carolinas Utilities Commission, which provide additional background.  

Escalating (power plant) costs stem primarily from the increased costs of commodities that drive the costs of major equipment items, as well as rising skilled labor rates.  Notably, these escalating costs will also increase the construction costs of other base load alternatives, such as IGCC, nuclear and combined-cycle generation.  Rising prices for major power plant projects is a global trend, driven by global demand.;

If we were to look only at the impact on our integrated resource planning (IRP) model’s base case analysis, we might simply conclude that the Cliffside Project is no longer the preferred option.  When a variety of sensitivities and scenarios are considered in the model, however, the Cliffside option continues to be least cost over a number of those sensitivities and scenarios.

Our updated IRP analysis considers a number of sensitivity and scenario analyses, and reveals the following important conclusions:

  • A portfolio that includes only gas and nuclear performs well under base case assumptions, but such a resource plan is more risky and less robust than the balanced plan that includes the Cliffside Project, new nuclear and new gas;
  • The Cliffside Project is a good hedge against natural gas price volatility;
  • The Cliffside Project is a good hedge against the potential inability to construct new nuclear plants during the near-term;
  • Partial (50 percent) ownership of the Cliffside Project is economically efficient, and a plan that includes 50 percent of Cliffside is essentially equivalent in cost to a “least cost” combined-cycle plan.

If we decide to partner with a joint owner for 50 percent of the Project, we will mitigate our capital costs and customer rate impacts by a commensurate amount.  In essence, our customers would get a “volume” discount – 800 or so MW built at the lower 1600 MW cost.

Thus, though the cost of power plant construction is going up, we view the Cliffside project as relatively low cost insurance against a number of future contingencies and uncertainties – particularly it will provide protection against undue reliance on gas generation and its historic fuel price volatility and protection against the unavailability of new nuclear generation.

The Cliffside modernization project includes:

  • Two state-of-the-art, 800-megawatt, highly efficient coal-fired units that will be among the cleanest in the nation
  • The retirement of Cliffside units 1-4 with a capacity of 198 megawatts and the removal of the site’s heated water discharge in the Broad River 
  • Cost savings by leveraging existing Cliffside facilities, such as water intakes and transmission equipment, and sharing new unit sulfur dioxide scrubber equipment with existing unit 5
  • Substantial economic benefits for Cleveland and Rutherford counties

Duke Energy is a diversified energy company with a portfolio of natural gas and electric businesses, both regulated and unregulated, and an affiliated real estate company. Duke Energy supplies, delivers and processes energy for customers in the Americas, including 28,000 megawatts of regulated generating capacity in the United States. Duke Energy’s Carolinas operations include a diverse mix of nuclear, coal-fired, natural gas and hydroelectric generation that provides 19,900 megawatts of safe, reliable and competitively priced electricity to more than 2.2 million electric customers in a 22,000 square mile service area of North Carolina and South Carolina. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: www.duke-energy.com.

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