October 23, 2013

NC Utilities Commission upholds Duke Energy’s 7.2% rate increase

NC regulators uphold a 7.2% rate increase for Duke Energy. The NC Utilities Commission had to review the rate case after a NC Supreme Court ruling.

North Carolina regulators Wednesday upheld a 7.2 percent rate increase for Duke Energy customers that they had originally approved 21 months ago only to be rebuffed by the N.C. Supreme Court.

The N.C. Utilities Commission said it made the right decision the first time around in January 2012, by balancing the economic interests of Duke’s Wall Street investors and the Charlotte power company’s 1.9 million customers in North Carolina.

The commissioners rejected the Supreme Court’s contention that they had given short shrift to the economic concerns of North Carolina’s residents in approving Duke’s rate increase. The Supreme Court in April had directed the Utilities Commission to review the rate increase, after NC Attorney General Roy Cooper mounted a legal challenge.

Duke’s residential customers have been paying about $7 a month on average since the rate increase was approved to cover the costs of new power plants and general operating expenses. The Utilities Commission approved Duke’s rate increase after holding public hearings in Raleigh and around the state.

“The Commission listened with attention to hundreds of consumers at times late into the night,” the Utilities Commission wrote in its order. “The Commission has made the ability of consumers to pay a consideration of a paramount importance in this case. Suggestions to the contrary are unfounded.”

About 10 percent of Duke’s 1.9 million North Carolina customers are in Chapel Hill, Durham and western parts of the Triangle.

The rate case involving these customers is not related to Duke’s Raleigh-based subsidiary, Duke Energy Progress, whose customers include Raleigh and the eastern half of the state. A rate increase approved for Progress has also been challenged by the Attorney General and is currently on appeal.

In 2011, Duke applied for a 15 percent rate increase and later agreed to reduce the requested amount by more than half, to boost annual power sales by $309 million to cover the company’s corporate expenses.

“There is no credible and substantial evidence disputing the prudency, reasonableness, or necessity of these costs,” the commissioners wrote.

The Utilities Commission also noted that in agreeing to halve its rate hike, Duke agreed to contribute $11 million to help low-income customers. Duke also agreed to defer other expenses, “thereby providing $51 million in relief in present rates to respond to the present economic straits.”

The commissioners also spelled out their rationale for rewarding Duke investors with a fair and equitable return on their investment. Failing to protect Wall Street’s interests, the commissioners explained, could ultimately backfire against Duke’s customers by resulting in higher costs to borrow capital.

“The Commission could have and did reduce the economic burden on consumers,” the commissioners wrote. “Any further reduction would unduly penalize the Company and is not justified by the evidence.”

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