@NCCapitol

@NCCapitol

$600M Duke Energy request just the beginning in ongoing rate case

Posted March 7, 2018 6:29 p.m. EST
Updated March 9, 2018 10:45 a.m. EST

Duke Energy

— A $13 billion electric grid upgrade would boost Duke Energy electric rates in North Carolina well beyond the 16.7 percent base rate increase the company asked state regulators to approve last year.

Duke's North Carolina president testified Wednesday that this additional rider would boost rates another 1.5 percent every year, give or take, for 10 years.

That adds up to an additional 16 percent increase to pay for the grid, and since businesses pay a lower rate than residential customers, residential customers would see actually impacts up to 25 percent by the end of the decade.

And that's after factoring in expected savings Duke has proposed to pass along to customers from a recent cut in the federal corporate tax rate.

This "grid rider" would start relatively small, bringing in another $36 million or so in the first year. The impact would grow quickly as Duke Energy implements changes that the company says would help the system weather storms, allow solar installations to feed electricity back into the grid, protect against cybersecurity attacks and give customers more real-time information about their energy usage.

Some of this cost would be baked into the monthly amount that customers pay before they use any electricity.

"A real burden on low-income households," said David Neal, an attorney for the Southern Environmental Law Center and several other groups that are pushing back against the charge.

The rider is part of a rate case now before the North Carolina Utilities Commission, an appointed regulatory body that decides how much Duke and other monopoly utilities can charge their customers and how much profit they're allowed to make.

Duke officials say the grid upgrades are needed modernizations. Opponents argue that they're a company effort to boost profits, since Duke is allowed to make about a 10 percent return on new construction.

This is a key to the company's revenue strategy, attorneys argued before the commission Wednesday. Duke reported more than $3 billion in profit last year, and its most recent earnings report pitched shareholders an expected 4 to 6 percent dividend growth and an 8 to 10 percent total shareholder return.

The rider is in addition to the $600 million in new annual revenue Duke has requested for various other changes, including an ongoing shift from coal-fired power to natural gas and costs associated with cleaning up coal ash pits outside the older facilities. That $600 million figure, which would translate to a 16.7 percent rate increase for residential customers, has since come down some through negotiations with the Public Staff, which represents ratepayers in cases before the Utilities Commission.

The Public Staff is one of several groups arguing against approval of the full increases sought by Duke.

The two sides remain divided by hundreds of millions of dollars a year and haven't agreed how to return federal tax savings to customers or whether customers, instead of Duke shareholders, should bear the brunt of coal ash cleanup costs. The Public Staff initially proposed that Duke Energy Carolinas, which serves Durham, Orange and Chatham counties, part of Wake County and much of the western half of the state, give its customers a rate decrease instead of the increases the company requested.

The Utilities Commission will decide these issues, and the back-and-forth proceeds much like a court case, with the appointed commissioners sitting as judges.

This case deals primarily with Duke Energy Carolinas. The commission recently decided a similar case for Duke Energy Progress, a sister company that serves the eastern half of North Carolina, approving about half of that company's requested increase.

In the previous case, regulators said the company could pass most of its coal ash cleanup costs along to customers, but only after they were incurred. The company had sought to recover future costs more quickly.

The precedent signals a similar decision is in the offing for Duke Energy Carolinas. Both entities are owned by Duke Energy, which is based in Charlotte and serves some 7.5 million customers in six states with electricity and 1.6 million with natural gas.

The company argues that dealing with coal ash is a routine part of business and that ratepayers in the past benefited from the relatively low cost of allowing the ash to pile up as once allowed by state and federal regulations. Those regulations changed after an ash spill in the Dan River in 2014, a catastrophe that led to criminal charges against the company.

Some residents near ash pits have been drinking bottled water for more than three years due to concerns over water toxicity from coal ash in unlined pits, and Duke has a long-term plan to remove the ash or cap it in place.

Correction: This post has been edited to correct the approximate number of Duke Energy customers.