Duke Energy Progress has proposed a 16.7 percent rate increase for its residential customers in North Carolina, the largest rate hike the Raleigh-based power company has sought since it was called Carolina Power & Light in the 1980s.
The power company made the filing with the N.C. Utilities Commission on Thursday. The review, hearings and legal arguments will likely last through winter before the Utilities Commission issues a decision. Duke Energy Progress is asking the Utilities Commission for a ruling in time for the new rates to go into effect Jan. 1, 2018.
Residential customers could see their monthly bills increase from $104.68 to $122.48, adding about $213 a year to their power costs, if the rate increase is approved in full. Commercial and industrial customers would see increases of 13.5 percent. The average across all customers would be 14.9 percent.
Residential customers traditionally pay a greater share of electricity costs because it costs the utility more to provide household service, said Duke spokesman Jeff Brooks. Duke Energy Progress has 1.17 million residential customers, 200,000 commercial customers and about 3,500 industrial power users on its system.
David Fountain, Duke Energy’s North Carolina president, said the rate increase is needed to modernize the company’s aging power grid and for general maintenance, repairs and upgrades.
The company’s cost calculations and accounting will be challenged by consumer advocates, environmental groups and potentially corporate customers whose businesses are heavily dependent on electricity. One likely source of disagreement could be Duke Energy Progress’s intent to charge its customers $195 million for five years to begin recovering its costs for moving coal ash from open-air pits to lined landfills, as required by the state’s Coal Ash Management Act of 2014. Duke Energy Progress is excavating ash from its Asheville plant and moving the waste to a site in Georgia.
It is also moving ash from its L.V. Sutton Plant in Wilmington and moving the material to Chatham County at the Brickhaven Mine in Moncure. The company has moved about 7 million tons to date and has about 7.8 million tons to transfer to meet a state-imposed August 2019 deadline.
Brooks said the rate customers pay is designed to cover the cost of supplying electricity to the home, which includes power plant construction, operation, maintenance, equipment, labor, insurance and the cost of environmental compliance.
“A lot of people will make the claim that this is Duke’s mess, so why should we have to pay for it?” Brooks said. “The cost of complying with state and federal regulations is typically paid for by the customers.”
Utility rate requests are rarely granted in full, but even if the request is reduced, residential customers could well see their bills increase by more than $100 a year. Duke Energy Progress’s last rate request in 2012 was for an 11 percent average increase; it received a 5.5 percent increase.
Chris Ayers, executive director of the Public Staff, which represents the public in rate cases, said his agency will conduct an in-depth audit of the rate request to determine if the utility’s calculations are eligible for rate recovery, and if the expenses are justifiable. The Public Staff will also rely on outside consultants to assess the company’s costs associated with coal ash disposal.
“We’ve got thousands of pages of exhibits to go through to start mapping out a case,” Ayers said.
Duke Energy Progress is a utility subsidiary owned by Charlotte-based Duke Energy with 1.37 million North Carolina customers. Duke Energy Progress operates independently from Duke’s other utility subsidiary, Duke Energy Carolinas, which sells electricity in the western part of the state and Durham and Chapel Hill, and will file for a rate increase this summer.
One of the company’s rationales for higher rates is that higher revenue makes the utility more appealing to Wall Street investors.
“The Company’s current rates are not providing sufficient revenues for the Company to meet its day-to-day operating expenses and also provide its investors with reasonable returns on their investments of needed capital,” Progress said in its filing.
Duke Energy Progress will ask the Utilities Commission to boost its annual revenue by $477.5 million to compensate the company for investing in two natural gas-fired power plants and building four solar farms, as well as rebuilding sections of its power grid that were destroyed by Hurricane Matthew last year. The utility had to restring nearly 300 miles of downed wire, replacing 5,500 utility poles knocked over by the storm.
The rate request is not intended to cover the utility’s costs of fuel used to run power plants, of financial incentives paid to customers for adopting energy-efficiency measures, and the costs of subsidies paid to renewable energy producers for supplying power to the grid. Those costs are covered by means of annual adjustments subject to separate Utilities Commission reviews.