Charlotte, N.C. — The head of Duke Energy says changing how it encourages customers to use less power will help appropriately compensate the company.

Ellen Ruff, Duke Energy Carolinas president, testified Monday before the state Utilities Commission. The panel is being asked to approve Duke's energy efficiency plan.

Save-a-Watt would let the utility add an average of 98 cents per month to the bills of its 1.8 million customers in North Carolina in 2009.

The rate could go up or down in following years to help recover much of the cost of building new power plants or buying electricity, along with a profit for the company. The commission regulates the utility's profits.

"We have an opportunity – not a guarantee – of recovering our program costs and achievable earnings comparable to supply-side resources on our energy-efficient investments," Ruff told the commission.

Ruff said customers wouldn't have to pay for more expensive power on the open market if they hold down demand.

“If we're not much more aggressive about energy efficiency, we have to build power plants," added Paige Sheehan, a spokesperson for Duke Energy.

But attorneys and advocates representing the state, utility consumers and environmentalists say Duke's Save-a-Watt plan is too expensive and doesn't save enough energy – only about a 1 percent reduction by 2015.

"We agree with the company that we need to give utilities proper incentives to maximize efficiency and energy conservation in particular," said Gudrun Thompson with the Southern Environmental Law Center. "This proposal is just not going to get the job done."

“We are supportive of cost efficiency for North Carolina and expanding the programs we have," said James McLawhorn, director of the Public Staff's electric division, the state agency that represents utility customers.

However, when asked if he is opposed to Duke's Save-a-Watt program, McLawhorn replied, "Yes."

McLawhorn is proposing a traditional plan in which Duke would recoup its out-of-pocket expenses and lost revenues for three years and would be eligible for a bonus incentive.

“We don't think we can achieve the kind of energy-efficiency savings that we need based on the old models and old approaches,” Sheehan argued.

Duke Energy Carolinas presented the program in May 2007. It is designed in part to meet a state law that required electric utilities to generate 12.5 percent of their power from alternative energy sources or through energy savings by 2021.

The company wants to raise rates to an amount equal to 90 percent of what it would cost to generate the electricity that would have been produced had it not been for the energy-savings plan. If Save-a-Watt doesn't produce energy savings, Duke says it will return what it has charged on a prorated basis.

"The company will take the risk that its programs will perform and that customers only pay for actual results," Duke lawyer Lara Simmons Nichols said.

Duke would create financial incentives and rebates to encourage customers to save electricity by sealing windows and doors, buying fluorescent light bulbs or purchasing energy-efficient appliances.

Duke can do much better than its projected energy savings, according to environmental groups that staged a small protest outside the hearing. They said Duke could reduce energy use by 1 percent annually.

"That's not an energy-efficient program. That's a small drop in the bucket of the world of possibility," said Shana Becker with the North Carolina Public Interest Research Group, one of about a dozen groups that want Duke Energy to withdraw the Save-a-Watt proposal.

Duke Energy plans to call several executives as witnesses this week. The panel also will meet Aug. 18 to hear from Duke Energy chief executive Jim Rogers. It's unclear when the committee would rule.

Progress Energy is proposing an energy-efficiency program that does not include additional fees. The plan would be to split any savings 50-50 between the company and its customers. A hearing on Progress Energy's program is scheduled for September.