NC high court hears challenge of Duke Energy rate

Posted November 12, 2012 2:01 p.m. EST
Updated November 12, 2012 4:59 p.m. EST

— North Carolina's attorney general wants the state's highest court to reverse Duke Energy's 7.2 percent electricity price increase, a decision that also let the country's largest electric company lock in a 10.5 percent profit while consumers struggle.

The state Supreme Court on Tuesday hears arguments in a case challenging Duke Energy's rate increase on its 1.8 million North Carolina customers. The hike was approved in January by the North Carolina Utilities Commission.

The decision – opposed by hundreds of consumers who spoke at public hearings or wrote the commission – pushed typical residential bills up by $7 a month to almost $103.

"Allowing double-digit profits when families and small businesses are struggling just to keep the lights on is wrong," Attorney General Roy Cooper said in a statement Monday.

Cooper's court challenge claims the Utilities Commission failed to consider North Carolina's high unemployment and other tough economic conditions that leave consumers struggling. The Utilities Commission and its division that advocates for consumers, the Public Staff, too readily accepted Duke Energy's arguments for a rate increase, he said.

"(People are) having to adjust their budgets. Utility companies should have to do the same thing," he said. "They should have to operate on a lower profit margin, particularly when you consider what's happing to North Carolina consumers."

Charlotte-based Duke Energy said Monday its rate increase was justified and reasonable by the state regulator responsible for balancing the interests of both customers and investors. The contested issues include the profit margin Duke Energy was allowed to earn after capital investments of $4.8 billion for power plant modernization, environmental compliance, and other construction projects approved by state regulators since 2009.

"We know there's never a good time for a rate increase, and we have worked hard to keep costs low for our customers. Maintaining a system of electric service for millions of North Carolina homes and businesses involves continuous investment, and by law we are entitled to recoup that investment," spokesman Mike Hughes said.

The company said in court documents that it's up to the regulator of the state's regional electric monopolies and not to the courts to decide what is fair both to consumers and the company.

This isn't the first time Cooper's office has gone to court arguing that consumers got a raw deal from the Utilities Commission. He appealed a Utilities Commission decision allowing Piedmont Natural Gas to use an experimental formula that would increase rates as customer usage declined. The company negotiated a lower rate increase with him in 2006.

But the case comes at a time that Duke Energy is under fire on multiple fronts.

Cooper's office and the Utilities Commission are running separate investigations into whether Duke Energy misled regulators ahead of its takeover of Raleigh-based Progress Energy, which was finalized in July. Hours after the deal was concluded, Duke Energy's board ousted the CEO promised throughout the 18-month process of combining North Carolina's two Fortune 500 energy companies.

Duke Energy now has 7.1 million residential and business customers in North Carolina, South Carolina, Ohio, Kentucky, Indiana and Florida.

Progress Energy last month asked regulators to approve an increase in electricity rates in the Duke Energy subsidiary's territories in eastern North Carolina and the Asheville area, which would raise the average home's power costs by almost $180 a year. Duke Energy said the requested rate increase is not related to its takeover. Duke Energy expects to seek rate increases in its pre-merger western North Carolina territory next year.

The Public Staff argued its negotiations with Duke Energy led to the best deal possible for consumers, including a big reduction in what the company originally sought. The Utilities Commission considered the toll on consumers, then had to use its best judgment, Public Staff attorney William Grantmyre wrote in a court filing.

"Considerations such as the changing economic conditions referred to by the Attorney General are not capable of quantification and therefore cannot be addressed in findings of fact," he wrote.