Duke Energy’s proposal for maintaining/updating their electric grid in their franchise service area of Indiana is a great example of a regulated utility’s typically large improvement process.

First step; maintain the current system without improvement for as long as practical. This is usually cost effective in keeping rates low but comes with the cost of more frequent outages and high system maintenance costs.

Second step; offer to upgrade an outdated (in this case a century old) technology. After nearly 100 years without significant changes, you would think there would be benefits in replacing old technology. The highlighted benefits would be expected; however, note the absence of any measurable benefits.

Third step; get paid. Regardless of what benefits actually occur, Duke will be guaranteed 80% recovery of their costs (not estimates, but what they actually spend). The remaining 20% will be included in a new filing that is subject to regulatory review. The regulators could disallow recovery of this 20% if they found Duke did not spend the money prudently or that the intended benefits did not materialize.

Bottom-line, this will most likely be approved. The rates will increase and service should be improved. Correlating cost vs. benefits is always a challenge.

Indiana is an outlier in the area, as they do not have customer choice for their electric service as neighboring states do. One would hope that with consideration of a modern electric grid, a modern energy choice program would precede it. And, with a modem energy choice program, there is no rate increase.

Realgy offers electric choice in Illinois where the average savings is over 8%.

 

Read the full Intelligent Utility article “Duke Energy Indiana proposes plan to modernize its statewide electric grid.”