Amended Duke Energy bill moves forward

Critics have knocked Senate Bill 559 for most of this session, saying it would allow the energy giant to boost its profits by hundreds of millions of dollars in the coming years. The company, and the bill's legislative sponsors, pushed back on that narrative but also declined to split the bill in two so that a less controversial section could be voted through without the language causing so much heartburn attached to it.

On Monday afternoon, new language was added requiring the utility to spend additional earnings that come from the bill on programs that help poorer customers. With that change, the bill moved through the House Rules committee on a divided vote, putting it as few as two steps away from final passage.

It's unclear whether the amended bill will get Gov. Roy Cooper's support. Rep. David Lewis, R-Harnett, who's carrying the measure in the House, said late last month that Cooper's team told him the governor “would not be comfortable signing” the bill into law as is, throwing up a potential major roadblock.

Cooper's press office didn't immediately respond to a request for comment on the amended bill Monday. Duke's team at the legislature said they weren't sure what the governor would do. Lewis said he plans to discuss the bill with Cooper's team Tuesday.

A manufacturer's group representing large electricity users and a lobbying group for clean energy companies still opposed the amended bill in committee Monday.

The legislation has two parts. The first changes the way regulated utilities finance storm-recovery projects, saving money and potentially lowering customer bills. The second part would let Duke and other utilities ask the North Carolina Utilities Commission, which approves rates, for three-year rate plans instead of having to come back year after year to request increases.

The latter section would also introduce a "banded" return on equity into state law. Because Duke is a regulated monopoly in North Carolina, the Utilities Commission limits the company's profits. Duke's allowed return on equity right now is set just under 10 percent.

With a banded return, the commission would approve a range, and anything within 1.25 percentage points of the band's midpoint would be allowed. If Duke's earnings come in below that band, it could ask for a rate increase. Above it, the company would have to refund the extra earnings to customers.

Monday's amendment would require the company to spend any extra earnings, up to the 1.25 percentage point mark, on infrastructure in distressed or low-income areas or on projects that boost job creation or affordable housing or on energy efficiency and other programs that help low-income consumers.

Earnings beyond the 1.25 percentage point mark would still have to be returned to customers.

Lewis said the change was meant to soothe concerns on over-earning. He reiterated that the multi-year rate plans would only be an option for the Utilities Commission and that the group's appointed members could still require annual looks at rate increases if they wanted to.

Lewis and other supporters have pitched the bill as a rate-making modernization effort similar to programs in 35 other states.

"I believe this is an important bill," he said. "I believe this is a bill that allows utilities to be forward-looking."

Peter Ledford, general counsel for the Sustainable Energy Association, said the bill's amendment would let Duke "double dip." The company earns a return on infrastructure projects, so if it over-earned and had to spend money on projects in distressed communities, it would make a profit on those projects.

Keven O'Donnell, an energy consultant who has opposed Duke's rate requests as an expert witness before the Utilities Commission in the past, had the same read on the amended bill.

"The amendment, as it stands, sounds like it's going to help low-income folks," he said. "It's going to go into rate base, and they're going to earn a return on it."

A Duke spokesman said that the Utilities Commission would have to approve these projects, though, determining that they were in the public interest.

"It would still have to serve a purpose," Tim Pettit said. "It couldn’t just be ... to earn a return.”