Duke, PSNC won’t bill customers for tax cut

In a utility rate dispute that has exposed a political rift on the N.C. Utilities Commission, Duke Energy said Tuesday that it has decided not to overcharge its customers for corporate income taxes the company doesn’t pay.

The decision will mean that the $56 billion Charlotte utility company won’t overbill customers to the tune of $19 million a year between Duke Energy Carolinas and Duke Energy Progress.

The economic relief for Duke’s 3.2 million North Carolina customers is a matter of pennies for a typical household.

But a Utilities Commission decision Oct. 9 to let utilities overcharge customers remains on the books, and will almost certainly face a court test in the coming months. The N.C. Attorney General has already vowed to appeal to get the commission ruling overturned. The N.C. Public Staff, a state agency that represents utility customers, is also considering an appeal.

“Duke Energy will not raise rates as a result of the North Carolina Utilities Commission’s recent order,” Duke said in its statement.

Duke took care to affirm the validity of the Utilities Commission ruling even as it elected not to follow it this time.

“Duke Energy supports the NCUC’s October 9 decision that explains the state of the law in North Carolina,” Duke said. “However, in this case, we have already reduced rates to reflect the decrease in corporate income taxes.”

As a result of the company’s decision, a typical Duke residential customer is saving 17 cents a month, and a Progress customer, 9 cents a month this year; in 2015, the monthly savings will be 25 cents and 15 cents, respectively, for Duke and Progress households using 1,000 kilowatt hours a month of power.

The dispute stems from the Republican-led tax reforms signed into law last year. The law required the Utilities Commission to adjust utility rates to account for tax changes so that utility companies don’t over- or under-collect from their customers. But in its instructions to the Utilities Commission, the law did not specifically identify the corporate income tax among the other taxes cited for rate adjustments.

North Carolina’s corporate income tax was cut from 6.9 percent to 6 percent this year, and will drop to 5 percent next year. Reflected in Duke rates, the tax reduction will decrease the company’s annual revenue by $19.2 million.

It would also reduce revenue by nearly $1.4 million for Dominion N.C. Power, by $3.1 million for Piedmont Natural Gas and by $1.3 million for PSNC Energy, the Triangle’s natural gas utility.

Like Duke, Gastonia-based PSNC also won’t overcharge its 510,000 customers in North Carolina.

“Like other utilities, PSNC Energy reduced its rates in July to reflect the decrease in corporate income taxes – and we plan to continue passing this decrease on to our customers,” PSNC spokeswoman Jodie Roberts-Smith said in an emailed statement.

Representatives at Richmond, Va.-based Dominion and Charlotte-based Piedmont could not be reached for comment.

In May, the commission decided the utilities do have to pass on all the tax changes, including the corporate income tax. In that 6-1 ruling, Commission Chairman Edward Finley Jr. dissented, writing the commission lacked the legal authority under the new tax law to adjust utility rates for the corporate income tax.

“The reduction in residential rates,” Finley wrote, “is insufficient to cover the postage to return the monthly payment.”

Duke reduced its rates this summer to account for all the tax changes, for both utility subsidiaries it operates in the state. The Raleigh subsidiary, acquired in 2012, was formerly called Progress Energy and years before that it was known as Carolina Power & Light.

Then earlier this month, following Finley’s lead, the commission reversed itself, ruling 4-3 to let the utilities overcharge customers and pocket the difference.

The three votes joining Finley came from Republican commissioners who switched their votes. All three were appointed last year by Gov. Pat McCrory.

The commission’s new decision prompted a strongly worded dissent from the three Democrats who accused their fellow commissioners of giving utility companies a corporate windfall. “The utilities have simply been afforded an unearned gain at the expense of North Carolina ratepayers,” the trio wrote.