AG Cooper to appeal Duke rate hike

bhenderson@charlotteobserver.comSeptember 25, 2013 

  • Moody’s upgrades Duke ratings

    Moody’s Investors Service on Wednesday upgraded the ratings of Duke Energy and three subsidiaries “following the resolution of several key issues and uncertainties” since its mid-2012 merger with Progress Energy. Since the merger, Duke has resolved state investigations into that deal, cost issues of a new Indiana power plant and the closure of a Florida nuclear plant. It has settled Carolinas’ rate cases and named a new CEO, Lynn Good. Moody’s upgraded Duke Energy one notch, to Baa1 senior unsecured. Bruce Henderson

North Carolina Attorney General Roy Cooper said Wednesday he will appeal the 4.5 percent rate hike granted to Duke Energy Carolinas this week.

The appeal is not unexpected. Cooper successfully challenged Duke Carolinas’ 2011 rate increase – now back before the N.C. Utilities Commission and unresolved – and appealed recent rate hikes for Duke Energy Progress and Dominion North Carolina Power.

Duke Carolinas’ increase would rise to an overall 5.1 percent after two years, about half its original request, and cost typical residential customers about $7.60 extra each month. It also allows Duke a 10.2 percent return on equity, or allowable profit margin – Cooper’s target.

“The evidence just isn’t there to support a double-digit profit margin,” Cooper said. “The (N.C.) Supreme Court told the utilities commission specifically to take consumers into account when setting the return on equity. The commission spent a lot of time talking about consumers, but the results were the same. It appears we’re going to have to go back to the Supreme Court to see who’s right.”

Return on equity has a powerful influence on customer rates. By negotiating its initial 11.25 percent request down to 10.2 percent, Duke gave up $112 million in revenue.

Cooper called the 10.2 percent return “Wall Street profit margins, not Main Street margins.” Had the commission set a return of 8.5 percent, he said, Duke’s rates would not have gone up at all.

The attorney general’s staff presented no expert testimony during the July rate hearings on an alternate return. Cooper said experts for other parties to the case testified that lower returns were appropriate.

Duke issued a terse response: “Duke Energy believes the N.C. Utilities Commission’s order is fair and appropriately balances the interests of both customers and the company. Our rates remain below the national average.”

Cooper had called the high court’s ruling on the 2011 case precedent-setting and likely to affect future cases. On Wednesday, he noted more pages in the commission’s order devoted to return on equity but no difference in setting the return. “I don’t want to give up hope on that (precedent), but when you issue an order that still provides a double-digit return on equity, I don’t think you’re considering the effect on customers,” he said.

NC WARN, a Durham clean-energy group that had claimed Duke tried to recover inappropriate expenses in the rate case, decried the “regulatory coziness with the world’s largest corporate utility.” “With unemployment high and interest rates low, it is unconscionable for Duke and the commission to raise rates repeatedly and request a guaranteed profit of 10.2 percent – especially when that profit far exceeds the maximum level the Public Staff’s own expert argued for,” WARN said.

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

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