N.C. attorney general: Duke’s profit margin hurts consumers

bhenderson@charlotteobserver.comAugust 21, 2013 

Attorney General Roy Cooper continues to hammer at Duke Energy Carolinas’ latest rate hike, saying the utility’s profit margin is too high and unsupported by Duke’s evidence.

Cooper, whose duties include advocating for consumers, won his appeal of Duke Carolinas’ 2011 rate case, which increased rates 7.2 percent.

The N.C. Supreme Court ruled this year that the state Utilities Commission didn’t fully document the impact to customers of the return on equity, or profit margin for shareholders, granted Duke.

Cooper says the ruling should lead to lower utility profits and customer rates in other cases, including the one now before regulators.

“Duke’s evidence in this rate case regarding customer impact was not significantly or meaningfully different from the evidence Duke presented in the prior rate case,” Cooper’s staff wrote in a filing Tuesday.

Cooper’s filing was among a last round of briefs this week by customer groups and advocates.

Return on equity was a prominent part of a weeklong hearing on the case before the N.C. Utilities Commission in July.

Before the hearing, Duke and the commission’s Public Staff agreed on terms that included a 10.2 percent return on equity. Duke had initially sought an 11.25 percent return.

The difference meant Duke gave up $112 million in revenue, showing the importance of return on equity in utility finances.

But Cooper has also appealed the 10.2 percent returns the commission recently granted two other utilities, Duke Energy Progress and Dominion North Carolina Power.

Duke says a healthy return would attract favorable financing terms for the $6.5 billion it plans to spend on transmission, distribution and other upgrades over the next three years. A lower figure means less new revenue for Duke and lower customer bills.

“The company believes the settlement reached in this case was fair and balances the interests of our customers and the company,” said Duke spokeswoman Lisa Parrish. “Concern for the effect on customers permeates every rate proceeding, and our rates remain competitive in the region and below the national average.”

Cooper cited a Moody’s study that ranked North Carolina sixth-highest for the 4.4 percent of disposable household income that its residents spend, on average, to pay their power bills.

In the settlement with the Public Staff, Duke agreed to cut its initial $446 million revenue request to $204 million for two years and $234 million after that. The subtracted revenue included about $578,000 in political contributions, sponsorships and charitable donations for which the Public Staff said Duke should not be reimbursed.

Before and during the hearing, Duke agreed to delete an additional $510,000, in part because of what it called accounting errors.

After three rate hikes since 2009, Duke agreed not to file another rate case for two years. Duke would also donate $10 million to programs for low-income customers. Duke Carolinas serves 1.9 million customers, mostly in Western North Carolina.

In a separate matter, the Utilities Commission on Tuesday approved an adjustment to Duke Energy Carolinas rates to reflect fuel costs. The change will reduce typical household power bills by 84 cents a month.

Henderson: 704-358-5051; Twitter: @bhender

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service