Tone Deaf: The Facts Behind Duke Energy’s Low-Income Programs

In a November 2017 interview, Lynn Good, CEO of Duke Energy, said: “Affordability is really important, whether you are a consumer with low discretionary income or you’re an industrial company that’s competing against Georgia or China or Latin America. … So we can’t walk away from affordability.”1

Duke elevated “affordable energy” as a priority in its 2018 sustainability report,2 even pointing to its adherence to the United Nations Sustainable Development Goals that list “Affordable and Clean Energy” as a key component of eradicating poverty and emphasize the importance of “access to basic services.”3

But in November 2018, Duke Energy sought to raise its South Carolina customers’ fixed monthly charge – the flat fee for hooking up to the company’s system, regardless of how much electricity the customer uses – from $8.29 to $28. The state’s utility commissioners were incredulous.

In May 2019, those commissioners cut the requested increase by more than half, saying it would discourage customers from investing in solar panels or energy efficiency and, by reducing customers’ control over their bills, could actually encourage more energy use. They said Duke’s executives “were ‘tone deaf’ as to how a 238% increase . . . would have negatively and adversely impacted the elderly, the disabled, the low income and low use customers.”4

Are Duke Energy executives really worried about affordability for low-income customers? A thorough examination of Duke’s low-income policies and programs throughout its six-state service territory – large areas of the Carolinas, Indiana and Florida, and smaller parts of Ohio and Kentucky, with a total of 7.7 million residents and businesses – shows:

• Duke repeatedly tries to raise fixed charges, which hurts low-income customers the most.
• Duke attacks energy efficiency programs in general and underfunds its own low-income efficiency programs.
• Duke also underfunds its programs that are supposed to help low-income customers pay their bills.
• Duke makes it harder for low-income customers to go solar.
• Duke works to shift low-income customers to programs that provide no consumer protections.

The Affordability Gap

The need for Duke Energy to help low-income customers is clear.

Duke serves 6.1 million residential customers in its monopoly territories in the Carolinas, Florida, Ohio and Indiana. The Environmental Working Group applied the Department of Energy’s Low-Income Energy Affordability Data tool, or LEAD, to all census tracts in those territories,5 and calculated that more than 1.2 million live in poverty, as defined by the 2018 federal poverty guideline of $25,100 for a family of four.6 That means about 20 percent of Duke’s customers live in poverty, compared to the national rate of about 12 percent.7 (See Appendix Table 1 for details.)

Each year, the research firm Fisher, Sheehan & Colton, or FSC, estimates the home energy “affordability gap” for every county in the nation. The affordabiity gap is the difference between affordable household energy costs and what people actually pay. FSC says households should not spend more than 6 percent of their income on heating, cooling, lighting and appliances.8 Their calculations look at the number of households below 150 percent of the poverty line, the level used to determine eligibility for assistance through the federal Low-Income Home Energy Assistance Program, or LIHEAP.9

After calculating the affordability gap for each state, FSC assesses the assistance provided by LIHEAP, funded annually by Congress, and compares that with actual funding needs. For 2018, FSC calculates that the national home energy affordability gap for households was more than $51 billion. LIHEAP doesn’t begin to bridge the gap: Its funding for 2018 was only about $3.6 billion.10

In Duke Energy’s monopoly territories, EWG’s analysis of FSC’s estimates for households up to 150 percent of poverty, using DOE’s LEAD tool, reveals that the affordability gap in Duke territories is somewhat over $1.4 billion. FSC estimates that only 7 percent of households eligible for LIHEAP assistance actually get it. From that, we calculated that in Duke’s territories, about 150,000 of the 2.1 milion households eligible for LIHEAP actually get it.

Duke does little to close the affordability gap, consistently underfunding its own programs designed to help low-income customers pay their bills. And much of the support comes not from the company but from ratepayers in the form of mandatory bill charges or voluntary donations. In Florida and the Carolinas, the Duke Foundation merely matches voluntary donations from customers and employees, and the amount the foundation will match is carefully capped.

Based on the affordability gap estimates of FSC, here’s how Duke’s low-income payment assistance programs stack up in Duke’s monopoly territories:

• In Duke’s North Carolina territory, the affordability gap is more than $500 million. Duke’s low-income bill support is a potential of more than $3.25 million, depending on customer contributions and Duke Foundation’s match of those contributions.11 (The cap is on Duke’s contribution. Ratepayer contributions can continue and exceed the base amount.) Duke serves about 2.9 million residential customers in the state.12
• In Duke’s South Carolina service area, the affordability gap is nearly $240 million. Duke’s bill-assistance program is a potential of at least $3.25 million, depending on customer contributions and Duke Foundation’s matched contributions.13 Duke serves over 630,000 residential customers in the state.14
• In Duke’s Florida service area, the affordability gap is more than $400 million. Duke’s bill-assistance funding is a potential of at least $2 million, depending on customer contributions and Duke Foundation’s matched contributions.15 Duke has nearly 1.6 million residential customers in Florida.16
• In Duke’s Ohio territory, the affordability gap is about $155 million. The state has a program to assist low-income households, funded by a mandatory surcharge on ratepayers’ monthly bills. In addition, Duke contributes about $300,000 a year to a Salvation Army program to help low-income customers pay heating costs in the winter months.17 But much of that money comes back to Duke in the form of bill payments. Duke has more than 260,000 residential customers in Ohio.18
• In Duke’s Indiana service area, the affordability gap exceeds $107 million. Over the past five years, Duke provided an average of about $760,000 a year in assistance for low-income customers’ winter bills, with about 15 percent of that coming from mandatory surcharges on other customers. As a result of settlements with state regulators over the operating costs of its Edwardsport coal-to-gas power plant, since 2012 Duke has also paid about $5.7 million to various initiatives to help low-income customers.19,20 That averages an additional $814,000 a year – but Duke can hardly claim credit, since the settlements resulted from regulators’ and public interest groups’ objections to past overcharges for Edwardsport. Duke Indiana serves more than 720,000 residential customers.21

The coronavirus pandemic will make affordability challenges even more severe.

Depending on the extent of unpaid utility bills, or arrearages, once state-imposed disconnection moratoriums are lifted, arrearages for customers up to 150 percent of poverty could range from $1.3 billion to nearly $4 billion in states where Duke Energy operates monopoly utility companies, according to the National Consumer Law Center.22 But Duke wants even more: In Indiana, Duke and its fellow utility companies are seeking to have customers cover its losses from electricity they didn’t use during the pandemic, although residential demand has increased since the coronavirus outbreak.23

Raising Flat Monthly Charges

The fixed monthly charge is the part of the electricity bill intended to cover administrative costs – installing and reading meters, billing, and maintaining the poles and lines that connect the home to the distribution system. Fixed charges have historically run about $5 to $10 a month, depending on the number of customers served.

Low-income customers already face challenges paying for basic necessities like food, medicine and utility bills. Increasing the flat monthly charge on their utility bills, above and beyond what they pay for the power they use, only makes things harder. A $20 increase in the flat monthly charge would be an outrageous gouging of all Duke households but might hardly be noticed by middle- or upper-income customers. It would hit low-income households much harder.

That’s doubly unfair, because low-income customers tend to use less power than other customers.

John Howat, an analyst with the National Consumer Law Center,24 was an expert witness for the NAACP and other groups opposing Duke’s most recent request to raise the flat monthly charge in South Carolina. He told the state utility commission that although many other utilities have petitioned regulators for permission to raise the flat charge, the average increase granted from 2015 to 2018 was $1.38 a month. He called Duke’s proposal “an extreme outlier from national practice.”25

Howat said the proposal “raises profound equity concerns because, if implemented, it would disproportionately harm low-income, elderly, and African-American ratepayers, who on average use less electricity than their counterparts in nearly every region of the country.”26

Federal data back him up.

EWG analyzed data from a 2015 survey by the Energy Information Administration on electricity use in American households, broken down by income. We found a big usage disparity that grew as the income gap increased: Households with less than $20,000 in annual income used 16 percent less electricity than the average use of all households, 12 percent less than households earning $40,000 to $59,000, and one third less than households with incomes of $140,000 and above.27 (See Appendix Table 2 for details.)

As to who is subsidizing whom, the North Carolina attorney general’s office found in 2017 that approving Duke’s request to raise the fixed charge from $11.13 to $19.50 would force low-use customers to subsidize high-use customers.28 In lowering Duke’s requested charge to $14, utility commissioners said the attorney general’s office declared that the higher fixed charge “will shift costs to small users such as low-income and elderly consumers who live in small apartments, as they are charged the same unavoidable [flat rate] as other residential consumers who live in spacious high-consumption residences.” 29

This principle was also cited in a 2015 paper by the nonprofit Regulatory Assistance Project,30 a 2015 ruling by the Illinois Commerce Commission,31 and a 2015 resolution by the National Association of State Utility Consumer Advocates.32 All three opinions concluded that substantial hikes in the fixed monthly charge would mean that high-use customers would see not only lower-than-average increases but even decreases in their monthly bills.

In other words, energy hogs exact a higher demand on the system and should pay more. The Regulatory Assistance Project says that jacking up the customer charge is akin to a monopoly business’ charging its customers whatever it wants – the very kind of practice that utility regulations are intended to prevent.

Attacks on Energy Efficiency Hurt Low-Income Customers the Most

Energy efficiency is the nation’s third-largest electricity resource. According to the American Council for an Energy-Efficient Economy, or ACEEE, the electricity saved through advances in efficiency achieved in the past 20 years equals almost a fifth of that generated by all power sources combined.33 ACEEE says that since 1990, efficiency investments have averted the need for more than 300 additional large power plants.

Efficiency programs save money for all ratepayers, but low-income customers have the most to gain. Although low-income customers use less energy, their homes tend to be less efficient. And their energy burden is larger: A 2016 ACEEE study found that the median low-income household spends more than three times greater a share of income on energy bills, compared to higher-income households.34 The study found that much of that burden could be reduced by raising the efficiency of low-income households to the median.

Yet Duke Energy has consistently undermined customer savings from efficiency, underfunding its efficiency programs and undercompensating customers for efficiency investments.

In 2014, Duke and other utilities succeeded in getting Florida state utility regulators to slash the state’s energy efficiency goals by 90 percent. The Southern Alliance for Clean Energy, which opposed the efficiency cuts, said setting “meager” efficiency goals “promote[s] the construction of new power plants  – which earn the companies a hefty profit, while leaving fewer opportunities for customers to lower energy use and save money on bills.”35

In 2014, Duke and other utilities successfully killed Indiana’s energy efficiency program.36 In 2018, a study estimated that Indiana ratepayers will pay $140 million more from 2015 through 2019 than if the program had stayed in place.37

Duke has repeatedly claimed that both solar customers38 and customers who are more energy efficient39 are being unfairly subsidized by other ratepayers. But in Duke’s most recent bid to raise the fixed monthly charge in North Carolina, advocates and the state attorney general pushed back against that claim.

Many low-income customers rent, so assessing their landlords a higher fixed charge is a disincentive for property owners to spend money on efficiency measures that would lower their tenants’ monthly bills. The attorney general’s office urged that the fixed charge be as low as possible to encourage efficiency investments.40 Duke touts its principal South Carolina efficiency program for low-income customers as saving a customer $45 a year,41 but Howat of the National Consumer Law Center noted that Duke’s requested fixed-charge increase would wipe that out in two billing cycles.42

That’s not only because Duke’s proposed fixed-charge increase was exorbitant but also because its programs to help lower-income customers save money through efficiency are woefully inadequate.

Duke’s main efficiency initiative aimed at low-income customers is the Neighborhood Energy Saver program, which operates in all its monopoly territories. In the most recent South Carolina rate case, Howat pointed out that although nearly 40 percent of Duke’s residential revenue comes from lower-income customers, the Neighborhood Energy Saver program gets just 3.5 percent of Duke’s funding for all efficiency programs.43 In North Carolina in 2018, Howat argued that to make funding proportionate to revenue, Duke should increase the program’s funding from $1.9 million to $11.5 million.44

In ACEEE’s 2020 analyses of U.S. utilities’ energy efficiency programs – based on savings per customer, level of funding and the comprehensiveness of programs – Duke continues to rank low, with four of six Duke monopoly utilities ranking in the bottom half of major U.S. electric utilities.45 Taken together, Duke’s efficiency programs for low-income customers in the Carolinas, Florida, Ohio and Indiana showed improvement from ACEEE’s report in 2020, compared to 2017.46 Nonetheless, three of Duke’s subsidiaries score zero points for percent of energy efficiency funding dedicated to low-income programs.47 (See Appendix Table 3 for ACEEE’s rankings by state.)

The most improved subsidiary was Duke Energy Florida, ascending to a ranking of 14, from 35 in 2017. However, a 2019 Southern Alliance for Clean Energy analysis, despite recognizing Duke’s low-income programs as some of better ones in the Southeast, found that Duke could spend six times more than what it had on low-income programs.48

Keeping Low-Income Customers From Going Solar

Just as efficiency investments help low-income customers lower their bills, so can going solar. Net metering programs let customers with solar panels send excess energy back to the grid and receive credit from the utility. But most low-income customers can’t afford the upfront cost of installing solar panels.

Community solar programs allow multiple customers to share power from a solar array or storage battery. There are 16 states with community solar policies and community solar projects in 40 states.49

In 2017, North Carolina legislators mandated that Duke start its first community solar program. The program Duke came up with seems designed to fail.

Public interest advocates objected to the excessive fees required to join the program and to inflated costs. The North Carolina Sustainable Energy Association calculated that the cost of the solar power purchase agreements was high and “exceeds the proposed bill credit,” so participants will not see a savings on their bills.50 State law does not let low-income customers pay reduced rates, which for all practical purposes shuts them out of the program. Utility commissioners approved the plan but said Duke should explore ways to bolster low-income participation.51

South Carolina passed a community solar law in 2015,52 but Duke delayed starting its program until 2018.53 For low-income customers, Duke will waive the sign-up fee,54 but those customers will still have to pay the monthly fee.55 Customers can’t join the program if they’re behind on their bills, or on a deferred payment plan that sets monthly bills at an amount that is adjusted up or down at the end of the year according to usage.56 It remains to be seen how many low-income customers will be able to participate under those conditions.

Prepay Service Plans Deny Consumer Protections

Prepay electric service is just what it sounds like. Customers pay into an account that is drawn down monthly. The utility keeps customers informed of the account balance and warns them if power is about to be shut off because of insufficient reserves.

Utilities claim that prepay plans benefit low-income customers by giving them control over their bills, letting them pay as often as they like, eliminating connect and reconnect fees and reducing late payment fees. In a recent filing to establish a prepay plan in Indiana, Duke also claimed that these plans result in significant reduction in customer energy usage.57

But in return, Duke wants Indiana regulators to waive consumer protections for prepay customers, such as those that protect customers from unwarranted shutoffs for nonpayment. Duke says those rules don’t “align well” with prepay plans, but an ACEEE report to the State of Minnesota noted that some recent prepay proposals in other states do retain such protections.58 Duke just doesn’t want to offer them.

Most prepay plans actually end up costing customers more than conventional payments. Prepay customers are often paying toward past bills, not current usage, so they keep falling further behind and incurring late fees. The ACEEE report found that Duke’s proposals for prepay plans in North and South Carolina would result in higher costs, and EWG’s analysis suggests Duke’s Indiana proposal would as well.

Duke’s claims that prepay plans result in lower usage are inflated by the utility’s preposterous position that disconnections for nonpayment are “energy efficiency” measures – as if customers who are shut off are choosing not to pay and not to use electricity. The fact is that prepay programs will benefit Duke by moving low-income customers off of conventional service, with consumer protections, to one where the customer alone is responsible for maintaining service.

Conclusion

Duke’s view of protecting low-income customers is much the same as its attitude toward solar and other forms of renewable energy. Both mask Duke’s primary objectives – maximizing profits and maintaining control over the production and distribution of power.

We find no evidence that Duke Energy considers electric bill affordability important to its business model. The company’s programs remain sorely underfunded, and there’s no indication that its executives plan to alter course. Duke has also pursued changes in rate structure and weak energy efficiency programs that actually undermine a low-income customer’s ability to pay their monthly bills or save money by going solar. Low-income customers’ access to community solar programs remains difficult to nonexistent.

In the face of this, it is especially callous of Duke to use disingenous concern for affordability to disguise its efforts to bolster profits and undermine customer opportunities to reduce their utility bills, particularly at the expense of low-income households. If Duke wants to be seen as a compassionate corporation at the forefront of America’s clean-energy revolution, it must put its money where its mouth is.

Appendix

Table 1. Duke Customers Who Live in Poverty

Of the 6.1 million customers in Duke’s monopoly territories in the Carolinas, Florida, Ohio and Indiana, EWG calculated that more than 1.2 million live in poverty, as defined by the 2018 federal poverty guideline of $25,100 for a family of four. That means nearly 20.5 percent of Duke’s customers live in poverty, compared to the national rate of about 12 percent.

Number of Duke Energy Customers in Poverty and the Affordability Gap for Duke Customers Up to 150% of Poverty

Table 2: Energy Consumption Varies by Income

The least disparity in electricity use is for cooking and microwaving. Only with space heating does the lower income bracket use slightly more power than the $40,000 to $59,000 income level. In all other categories, the low-income bracket uses less energy than for the average household and the higher income levels chosen here.

Average Annual Household Electricity Consumption (in Kilowatt-Hours)

Table 3: ACEEE Scores for Duke’s Energy Efficiency Programs for Low-Income Customers