Duke Energy: 7.2% more will do

Duke Energy agreed Tuesday to a 7.2 percent rate increase for its North Carolina customers, cutting its initial 15 percent request by more than half.

Duke agreed in principle to the limited increase with the N.C. Utilities Commission's Public Staff, which represents customers.

The commission itself still has to approve rate changes. A hearing begins Monday, and other parties to the rate case - including N.C. Attorney General Roy Cooper - will continue to fight a rate increase.

The Public Staff's endorsement clears a major hurdle for Duke and will, at least, shorten a hearing that had been expected to last up to a week.

The agreement gives each of Duke's major customer classes - residential, industrial and commercial - the same 7.2 percent increase. Duke had initially proposed a 17 percent increase for residential customers, adding about $18 a month to typical monthly bills.

Customers, from homeowners to Wal-Mart Stores, had loudly complained about the size of the increase Duke initially sought - its largest increase in the state in at least 20 years. Hundreds filled public hearings across the state, and more than 1,100 comments were filed with the Utilities Commission in the past two months.

Faced with those protests and unable to strike a deal with the Public Staff, Duke last week lowered the increase to 12 percent. The company acknowledged the financial hardship of a rate increase in the midst of economic turmoil.

The settlement trims $336 million in annual revenue from the $646 million Duke had sought. It allows Duke a 10.5 percent return on equity, or profit for investors, about midway between the 11.5 percent the company had first sought and the 9.25 percent the Public Staff recommended.

Duke also agreed to spend $11 million to help low-income customers, with all the money coming from shareholders.

Duke would not confirm the agreement late Tuesday but noted that it has been pursuing a settlement. "We look forward to sharing additional information but cannot do so at this time," spokesman Jason Walls said.

Most of the rate increase would repay the $4.8 billion Duke has spent on Carolinas power plants and pollution controls since 2009. Utilities are allowed to recover capital spending from customers.

"There will be some ratepayers who don't think they should get any increase," said Robert Gruber, the Public Staff's executive director. "But (Duke) has added about $4 billion in plants, and we've got a responsibility to judge that on the merits."

The staff had recommended that the Utilities Commission grant an increase of less than 5 percent.

The attorney general's job is also to stand up for consumers, and Cooper immediately announced he would oppose the increase.

"A 7.2 percent rate increase is too much for working families and businesses during these tough economic times," Cooper said in a statement. "At the hearing, our attorneys will ask tough questions and urge the Utilities Commission to consider the impact on consumers."

Duke has 1.8 million customers in North Carolina. It earned $1.3 billion in 2010.

The company won approval in 2009 for a 7 percent increase spread over two years and is likely to file for a third rate increase next year. It's also seeking a 15 percent increase in South Carolina, where it has 600,000 customers.