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- Before moving on to the challenges that faces DUK, it is necessary to lay down a few points about the RU segment as they will be constructive to our following discussion
- DUK’s value chain start from the procurement of fuel, where it purchases its coal, natural gas and oil through term and spot contracts from various suppliers. It generates electricity in all of its service territory except Ohio, then transform and distribute power to homes, offices and factories
‘You might ask How are the electricity rates determined? Duke has the flexibility to determine the rates, which must be approved by the states. The rates is subject limitations, which is a cap on return on investment. Duke charges its customers a rate which contains a fixed component and variable component. As u may on DUK’s rate schedule, the fixed component is the basic facilities charge
Solar - 1
- rooftop systems together with net metering state policies are potentially Disruptive to the traditional centralized electricity generators; Utilities, which own the energy grids that distribute power, now must reckon with how to make money selling energy to consumers who can produce it themselves.
- This simple diagram illustrates the relationship between different players in the solar market
- Solar contractors will lease, install and maintain the solar system to the households who subscribed, and customer pays a monthly subscription fee
- When customer generate more electricity than he uses, he will sell the energy to duke at retail price, this arrangement is called net metering
Solar - 2
This diagram shows the Problems presented by solar systems + net metering (1) it loses a portion of its customers, (2)the rates at which DUK pays for electricity from rooftop solar owners is too high (3) utilities spend huge bucks on maintaining the grid. Since solar users typically have lower power bills, they are not paying enough for their use of the grid. infrastructure and generation rates would continue to rise for the remaining ratepayers, giving them even more incentive to defect from the grid and switch to renewables.
Solar - 3
- We have two solutions to solve the problems arising out of rooftop solar systems
- The first recommendation is Utility-led rooftop solar program. The objective of this is to relieve DUK from net metering burden
- Under the program DUK pays the upfront cost of a solar installation located at a customer site and compensates customers for hosting the solar system in the form of a flat monthly payment or exemption from future increases in electricity costs over promised period;
- Customers still pays DUK as if electricity were generated at DUK’s facilities
- Since theres no more net metering, the most apparent advantage out of this program is to relieve DUK from the increasingly formiddabe net metering obligations
Solar - 4
- The second recommendation is a revision on the rates schedule design. The objective of this is to ensure that the solar users pay enough for the grid service. We recommend increasing Increase the fixed component and offsetting it with a lower variable rate. We hope the revision achieve the effect that an average consumers would pay less and a low-electricity consumer, such as a solar user, would pay more. Another advantage of this revision is that DUK can shoulder a lighter burden for its obligations under net metering. Of course, the drawback is that the redesign is subject to state approval, which may require lobbying and takes time.
- With this I conclude our presentation and now opens the floor for questions. Thank you for listening