LAW OFFICE OF CHARLOTTE MITCHELL

LAW OFFICE OF CHARLOTTE MITCHELL PO BOX26212 RALEIGH, NORTH CAROLINA 27611 919-260-9901 www.lawofficecm.com June 16, 2014 Gail Mount Chief Clerk North Carolina Utilities Commission 430 N. Salisbury Street Raleigh, NC 27603 5918 Re: Petition to Intervene and Initial Comments NCUC Docket No. E-2, Sub 1041 Dear Ms. Mount: Enclosed herewith please find the Petition to Intervene and Initial Comments of the North Carolina League of Municipalities filed in the above-referenced docket. Should you have any questions or comments, please do not hesitate to call me. Thank you in advance for your assistance and cooperation. Kind Regards, /s Charlotte Mitchell 4821-8333-7243, v. 1

STATE OF NORTH CAROLINA UTILITIES COMMISSION RALEIGH DOCKET NO. E-2, SUB 1041 BEFORE THE NORTH CAROLINA UTILITIES COMMISSION In the Matter of Petition of Duke Energy Progress, Inc. for Approval to Revise Outdoor Area and Street Lighting Schedules ) ) ) ) PETITION TO INTERVENE AND INITIAL COMMENTS BY NORTH CAROLINA LEAGUE OF MUNICIPALITIES NOW COMES the North Carolina League of Municipalities ( Petitioner ), by and through its undersigned counsel, and respectfully requests that the North Carolina Utilities Commission (the Commission ) allow its Petition to Intervene and Initial Comments pursuant to that Order Requesting Comments, issued in this docket on May 16, 2014, G.S. 62-72 and Rules R1-5, R1-6, and R1-19 of the Rules and Regulations of the North Carolina Utilities Commission. PETITION TO INTERVENE In support of the request to intervene in this docket, Petitioner respectfully shows the Commission as follows: 1. The name and address of the Petitioner is as follows: North Carolina League of Municipalities 215 North Dawson Street Raleigh, NC 27603 Attn: Sarah W. Collins 2. Petitioner s representative in this proceeding, to whom all notices, pleadings and other documents related to this proceeding should be directed, is as follows: Law Office of Charlotte Mitchell, PLLC 1

Charlotte A. Mitchell PO Box 26212 Raleigh, North Carolina 27611 Telephone: (919) 260-9901 E-mail: cmitchell@lawofficecm.com 3. On April 28, 2014, Duke Energy Progress, Inc. ( DEP ) filed a petition in the above-referenced docket requesting approval of several revisions to its area lighting and street lighting schedules. In that petition, DEP states that the schedules are being revised to enhance the deployment of Light Emitting Diode ( LED ) technology as a part of DEP s Lighting Modernization Program. 4. On May 16, 2014, the Commission issued an order in response to DEP s petition directing persons having an interest in the proposed revisions to DEP s lighting schedules to file petitions to intervene in this docket on or before Monday, June 16, 2014. 5. Petitioner is a membership association of more than 540 municipalities in North Carolina. Petitioner s primary purposes include promoting excellence in municipal government, advising and assisting members to ensure that municipal services are provided as cost effectively as practicable, advocating for cities and towns, and developing and coordinating a cooperative approach to municipal problems and issues of statewide importance. Among other services provided to its members, Petitioner routinely represents municipal views in state regulatory processes, such as this proceeding before the Commission. Petitioner s member municipalities that are located in DEP s service territory are customers of DEP and take service under the lighting rate schedules that are the subject of this proceeding. 6. The Commission allowed Petitioner to intervene and participate as a party in the Application for a General Rate Case by Duke Energy Carolinas, LLC, NCUC 2

Docket No. E-7, Sub 1026 and in the Application for a Rate Case by Duke Energy Progress, Inc., NCUC Docket No. E-2, Sub 1023 (the Rate Cases ). In both Rate Cases, Petitioner filed post hearing briefs and comments addressing the respective utilities LED offerings. 7. Because any order or ruling of the Commission in this proceeding will affect the interests of the Petitioner and its members, Petitioner respectfully petitions the Commission for leave to intervene and become a party to this proceeding and generally to have such rights and privileges afforded any party to proceedings before this Commission. INITIAL COMMENTS The Commission s order issued in this docket on May 16, 2014, indicates that on or before Monday, June 16, 2014 all parties may file initial comments regarding the proposed revisions to DEP s lighting schedules. If the Commission is inclined to allow the League s petition to intervene, the League respectfully requests that the Commission consider the following comments. During recent years, the League s members 540 of North Carolina s cities, towns and villages have faced a convergence of factors that have dramatically and adversely affected operating budgets. These factors include the economic contraction and associated loss of jobs; capital-intensive infrastructure needs; decreased property values and associated decreased municipal revenues; recently enacted statutory limitations on annexation authority, which hampers the ability to accommodate growth and expand tax base; and changes in tax laws that have a significantly adverse impact on 3

a municipality s ability to generate revenue. Given these existing and impending fiscal constraints, North Carolina s municipalities have had to reduce spending. Because street lighting accounts for a significant percentage of municipal operating budgets, street lighting is obvious place to look for cost savings. As an example, over the past five years, the City of Greensboro (a Duke Energy Carolinas, LLC ( DEC ) customer) has had to cut twenty percent (20%) from its general transportation fund budget, which has included twelve percent (12%) of staff, so the City must take advantage of every opportunity for innovative cost savings. Greensboro is exploring opportunities for cost savings with respect to street lighting since street lighting accounts for (35%) of general transportation fund budget. Light Emitting Diode ( LED ) is a solid state lighting device that can be used in street lighting applications. As was discussed at length in the Rate Cases, LED lighting offers several notable advantages over conventional lighting. As compared to conventional lighting, LED light engines last more than twice as long as conventional street light engines and require less maintenance. For these reasons, LED is the most cost effective street light technology. Since 2010, DEP has offered a rate applicable to LED street lights. A number of DEP s municipal customers have installed LED street lights as a result of the cost savings associated with the technology. For example, the City of Asheville has undertaken the most significant installation of LED street lighting to date, installing more than 7,400 LED street lights city-wide to date, with plans to install approximately 2,000 more. Most recently, Knightdale, Cary and Oxford have undertaken LED installations. 4

Customer Ownership and Flat Rate Since 2010, DEP has offered a customer ownership option for LED street lights. Under the customer ownership option, the City of Asheville is working toward the installation of 9,000 street lights that will save Asheville hundreds of thousands of dollars in operating expenses each year. Not every municipality desires to own street lights; some prefer to pay the utility for this service and forgo the additional cost savings that the customer ownership option provides. However, as demonstrated by the experience of the City of Asheville, customer ownership of street lights provides savings beyond the standard option as a municipality benefits from a lower cost of capital than the utility. In its petition, DEP has requested that the customer ownership option be closed to new installations as of the date of its petition. DEP states that the customer ownership option was created at a time when LED technology was unproven and that LED technology has now made significant advancements in pricing and other attributes. DEP opines that LED is now a mature technology and should be viewed like all other lighting resources. DEP also takes the position that closing this option will not prevent customer ownership of street lighting because municipal customers can purchase their own fixtures, and DEP will meter the electric usage. As Petitioner has indicated in previous filings, metering involves an unnecessary expense for municipalities and could make the customer ownership option cost prohibitive. At this point, DEP has sufficient data regarding LED energy consumption to offer a flat rate for LED street lights that removes the costs that are assumed by the customer under this scenario. 1 As the Public Staff advocated in paragraph 3 of its Reply 1 The League made an identical recommendation related to Duke Energy Carolinas in its Reply Comments filed in NCUC Docket No. E-7, Sub 1026 on April 14, 2014. 5

Comments of the Public Staff, filed in NCUC Docket No. E-7, Sub 1026 on April 14, 2014, those customers who are interested should be allowed to own their facilities, and such customers should be served under a lighting schedule at a flat monthly rate. Declines in LED Fixture Cost The cost of LED standard street light fixtures continues to decline. The City of Asheville s experience over the four phases of its LED street light program supports this fact, as depicted below in the figures provided by the City. Asheville LED Fixture Purchase Prices - $600.00.3 $900.00 $800.00 $700 5765.00.00......~569.00 ----.. $472.00 ~ $500.00 -- :;) ~ $400.00 $32~309.00.i... $300.00 --- $200.00 $399.00 --..._,_", <:=t"7no $269.00 no... ~~~~.~ -75W _21SW $100.00 $. 2011 2012 2013 2014 75W $320.00 $254.00 $219.00 $156.00 10SW $399.00 $309.00 $269.00 $195.00 21SW $765.00 $569.00 $472.00 $357.00 Fiscal Year The League acknowledges that, at some point, the cost of LED fixtures will stabilize. However, evidence and experience indicates that the fixture cost continues to decline. Municipal customers should benefit from this decline in cost. DEP s LED offering, under the standard option, involves a variable component that captures the decline in fixture cost. Under this option, only a portion of the cost of service is recovered through a fixed monthly charge; the remaining cost is treated as extra 6

facilities costs, with the customer paying a monthly charge of 1.3% of these costs for the duration of its electric service contract. By using this variable rate, DEP retains flexibility to reduce its charges for LED fixtures as the technology advances and the costs of the fixtures decrease, without having to apply to the Commission for approval of a new rate, and customers benefit from the declines in cost as new fixtures are installed. In its petition, DEP proposes to close this pricing approach to new installations. Subsequent to the Outdoor Lighting Forums hosted by Duke Energy in February and March of this year, DEC voluntarily committed to provide a confidential, annual report to Public Staff of what the company is observing for the costs of its standard LED street light fixtures. Further, the company indicated a willingness to engage in discussion with Public Staff as to whether a rate change is appropriate given all factors, but is not willing to commit to any rate adjustments in advance of those discussions. The League appreciates DEC s commitment on this issue. If DEP were willing to make this same commitment, the League supports this commitment in lieu of requesting the Commission to order DEP to maintain the variable rate component, so long as the Company meets with the Public Staff on an annual basis and commits to reduce the rate if there has been greater than a ten percent (10%) decline in standard fixture cost. Prioritizing Replacements In its petition, DEP proposes a full-scale replacement of mercury vapor ( MV ) fixtures by geographic regions. While municipal customers understand the need to replace MV fixtures, municipal customers are concerned about piece-meal replacement of fixtures and the associated safety and aesthetic concerns. 7

Offsetting Potential Increases in Lighting Costs In its petition, DEP requests that the LED 50 fixture be designated as a default replacement for its 5,800 lumen sodium vapor ( SV ) fixtures upon failure of the SV fixture. As the rate offered for the LED 50 is higher than the rate offered for the SV 5,800, this change out will result in an increase in cost to the customer. For example, there are 1,928 SV 5,800 fixtures in the City of Raleigh. The rates proposed by DEP are $7.23 per pole per month for the SV 5,800 fixtures and $8.04 per pole per month for the LED 50. If the City converted all of these fixtures, Raleigh s annual cost for street lighting would increase by $18,672, despite the fact that the LED 50 fixtures use approximately forty percent (40%) less energy than the SV fixtures. The League understands the need to replace the SV 5,800. However, the League is concerned about increasing cost, particularly increasing cost for conversion to LED technology. The League is concerned that practical considerations such as manpower and fixture supply may limit DEP s ability to convert conventional lighting to LED lighting; therefore, the League respectfully requests that the Commission consider directing DEP to develop a strategy to offset any increases that would occur when conversion to LED is necessitated by failure of the SV 5,800. In addition to offsetting cost increase, this strategy would address aesthetic and safety concerns discussed previously. WHEREFORE, the League prays that the Commission take these comments into consideration in reaching its decision in this proceeding 8

Respectfully submitted this the 16 th day of June, 2014. LAW OFFICE OF CHARLOTTE MITCHELL, PLLC /s Charlotte A. Mitchell NC Bar 34106 PO Box 26212 Raleigh, North Carolina 27611 Telephone: (919) 260-9901 E-mail: cmitchell@lawofficecm.com 9

NORTH CAROLINA WAKE COUNTY VERIFICATION The undersigned, being first duly sworn, deposes and says that he is the Regulatory Affairs Associate of NORTH CAROLINA LEAGUE OF MUNICIP ALITIES, that he has read the foregoing Petition to Intervene and Comments; that to her personal knowledge, the matters and statements contained therein are true, except as to those matters or statements made upon information and belief, and as to those he believes them to be true; and he consents to this verified petition being used as an affidavit. This the ~ day of June, 2014. Sworn to and subscribed before me this ~ day of June, 2014. '711~ Notary Pub My Commission Expires: n 111 C1fJUL1Jj{} Sarah W. Collins 10

CERTIFICATE OF SERVICE It is hereby certified that the foregoing Petition to Intervene and Initial Comments by North Carolina League of Municipalities has been served this day by e-mail as follows: Duke Energy Progress B. Somers Deputy General Counsel Duke Energy Corporation PO Box 1551/NC20 Raleigh, NC 27602-1551 Telephone: 919-546-6722 E-Mail: bo.somers@duke-energy.com H. Shirley-Smith Deputy General Counsel Duke Energy Progress, Inc. 550 South Tryon Street DEC45A/PO BOX 1321 Charlotte, NC 28201 Telephone: 980-373-3725 E-Mail: heather.smith@duke-energy.com Public Staff Christopher J. Ayers Executive Director 4326 Mail Service Center Raleigh, North Carolina 27699-4326 E-Mail: Chris.Ayers@psncuc.nc.gov This the 16 th day of June, 2014. LAW OFFICE OF CHARLOTTE MITCHELL, PLLC /s Charlotte A. Mitchell NC Bar 34106 PO Box 26212 Raleigh, North Carolina 27611 Telephone: (919) 260-9901 E-mail: cmitchell@lawofficecm.com 4814-0044-1115, v. 1 11