Duke Energy defends rate increase in court

Posted November 13, 2012

— The North Carolina Utilities Commission properly awarded Duke Energy Corp. a 7.2 percent increase on electric rates after weighing numerous factors, attorneys for the company and commission said Tuesday.

The state Supreme Court heard arguments to a challenge to the rate increase filed by the Consumer Protection Division of the Attorney General's Office. The state contends that the increase was exorbitant in light of the sputtering economy and the tight budgets many families face.

The Utilities Commission approved the rate increase in January for Duke's 1.8 million customers in North Carolina, despite opposition from hundreds of consumers at public hearings across the state. The increase, which took effect in February, added $7 to the average monthly residential electric bill, to a total of $103.

Kevin Anderson, chief of the Consumer Protection Division, argued that state law requires the Utilities Commission to consider the impact of any rate increase on both consumers and shareholders. The commission didn't spell out in its order granting the increase how it factored economic conditions into its decision.

Duke's lawyer Kiran Mehta countered that the law requires the commission to consider the changing economy only as it relates to shareholders, not consumers.

William Grantmyre, an attorney for the Public Staff, the state agency that represents consumers in utility cases before the commission, also told justices that Charlotte-based Duke offered several concessions in negotiating the rate increase.

"What the attorney general is doing here is seeking to attain all the benefits to residential customers of the settlement that Duke and the Public Staff entered into but to slough off any burden that's associated with that settlement," Mehta said. "They can't do that. It's a package."

Duke Energy rate increase graphic State challenges approval of Duke power rate increase

State Supreme Court hearing on Duke Energy rate hike Court hears challenge to Duke rate increase

Public Staff Director Robert Gruber said after the hearing that his office negotiated the best deal it could.

"The company was asking for about a 17 percent rate increase for residential customers, and we cut it down to 7.2 percent," Gruber said.

Duke spokesman Mike Hughes said the company has spent more than $4 billion on new, more efficient power plants and needs to recoup its investment. Still, he said, the company recognizes that rate increases are never popular, especially in a down economy.

"We understand that, but the true fact of the matter is we're making investments into the system to serve millions of customers every day (and) ensure that the lights come on when customers flip a switch," Hughes said.

Several economic experts who testified before the commission said Duke shareholders should get a return of 10.2 to 10.8 percent for the company's investments. Mehta said the 10.5 percent rate approved by the commission falls squarely in the middle of that range, and he argued that the commission must be granted some subjective leeway in determining what is a fair rate of return.

Anderson said those expert witnesses didn't consider North Carolina's weak economy in determining the rate of return. He also noted that a small change in that rate could have saved consumers millions of dollars.

"Blind deference is not due to the commission," he said. "Deference to the commission all hinges on whether it made proper findings and conclusions."

Duke has said that the rate increase – and a requested increase by Progress Energy – isn't related to its July takeover of Raleigh-based Progress.

The Attorney General's Office and the Utilities Commission are running separate investigations into whether Duke misled regulators ahead of the Progress acquisition. Hours after the deal was concluded, Duke's board ousted Progress Chief Executive Bill Johnson from the CEO position of the combined company.

If the high court sides with the Consumer Protection Division, the Duke rate case will go back to the Utilities Commission, which could mean rates for customers could be lowered, raised even higher or remain the same. The court is expected to issue a ruling in the next few months.


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  • westernwake1 Nov 13, 2012

    "It would mean that TWO companies would have to build the distribution network and each run wires to your house. Why would any one company spend the money (which was conservative's capital intensive comment) to duplicate infrastructure that was already in place?" - JDNCSU

    You also have a tough argument here because many of us from the Northeast grew up in towns (prior 1960) that had two electric utilities with their own plants. We had LILCO (now LIPA) and the town's private electric utility. We had low rates because they were forced to compete on price and service. This lasted until LILCO bribed the state politicans to force all the private electric utilities out of business... and became the sole monopoly with some of the highest rates & worse service in the nation.

  • westernwake1 Nov 13, 2012

    "It's you that are wrong westernwake...what would it take to have a choice of two electric service providers to your home? It would mean that TWO companies would have to build the distribution network and each run wires to your house. Why would any one company spend the money (which was conservative's capital intensive comment) to duplicate infrastructure that was already in place? In the end you can only use one set of wires from one provider, what happens to the other provider's wires? Providing duplicate infrastructure does not make economic sense in most cases, and THAT is why when people do not" - JDNCSU

    Well in that case - LET'S REMOVE THE LAW THAT ONLY ALLOWS ONE ELECTRIC UTILITY PER TERRITORY and see what happens. We should also do the same thing with Cable TV franchises. You are aware that there are several towns in the U.S. that have TWO CABLE COMPANIES. They have the lowest cable rates and highest rated service.

  • delilahk2000 Nov 13, 2012


  • dk12 Nov 13, 2012

    why is a 10% profit a good thing?
    inflation is 3%..maybe.. a 4 or 5% profit..they are a business and business must make money(profit)..but since they are a monopoly the profit should be less..there is less risk on their the profits should be lower..
    investing and maintaining power stations is what they do why should they get special treatment for this?? I don't understand. I used saw blades all the time should I get a special rate on new ones? I don't

    I just hope they keep the demand use program..we work hard to make this system work..and it pays..

  • eddybal Nov 13, 2012

    Conservative, give me a different one.

  • larieke Nov 13, 2012

    Duke sure made the Commission look like a bunch fools. Come to think of it, maybe they ARE a bunch of fools.

  • Conservative Nov 13, 2012

    So the law doesn't give a hoot about economic hard ships for consumers, just for share holders.

    How many interpretations of the law would you like based on your convenience?

  • eddybal Nov 13, 2012

    pdbullard, those "cheap" coal plants cost a lot of money paid by the health care system. In no other country of the western world do you find these outdated mega polluting coal burning power plants. The reason why utilities are shutting them down is the abundance of cheap natural gas.

  • JDAmbrosio Nov 13, 2012

    It's a ripoff, criminal!

  • pdbullard Nov 13, 2012

    This is what you get when to force energy companies to use sources like wind and solar that are not economical. Progress energy is requesting their first hike in 17 years. Those cheap coal facilities are being shut down by the government and the customers will have to pay for it. If you want to know who to blame look in the mirror