Tuesday, April 23, 2024

Attorney general seeks review of Duke Energy rate hike

Attorney General Josh Stein wants the state Supreme Court to review December’s decision by the N.C. Utilities Commission to allow Duke Energy to raise rates for some customers by 14.7% over three years.

Filed Tuesday, the appeal of the rate decision contends the Utilities Commission made four errors in the course of granting the rate increase for the Duke Carolinas service area.

Foremost among them was its decision to allow Duke a 10.1% return of equity there, three-tenths of a percent more than it granted for the Duke Progress service area last August.

By treating “differently substantially similar facts and circumstances,” and “similarly situated entities,” the commission’s December ruling was “arbitrary and capricious and constitutes an abuse of discretion,” the attorney general and his staff said.

The other points in the appeal concern the commission’s favorable-to-Duke treatment of tree-removal costs, electric-vehicle revenues and pandemic-related employee stipends.

Given that the rate increase could add about $20 to a typical ratepayer’s monthly bill, “every dollar counts” and the increase should be rejected, Stein said.

The appeal is one of three targeting the Duke Carolinas increase, as the Carolina Industrial Group for Fair Utility Rates and a quartet of electric co-ops also filed challenges against elements of it on Tuesday.

Stein, however, is the only filer who’s running for office, as he’s campaigning for the Democratic Party’s gubernatorial nomination against a field that includes former Supreme Court Justice Mike Morgan.

The company contends higher rates are needed because of increasing demand for electricity as North Carolina’s population grows, sparking hefty proposed investments in new generating capacity and improved reliability. It is among the largest U.S. electric utilities and natural gas distributors with operations in the Carolinas, Florida, Indiana, Kentucky, Ohio and Tennessee.

The Duke Carolinas service area includes Charlotte, much of the western part of the state, and much of the Piedmont.

Duke Progress covers the Asheville area and much of Down East. There is overlap between the districts, especially here in the Triangle and around Asheville. The far northeast, meanwhile, is served by Dominion Energy.

The return-on-equity percentage was a fiercely-argued issue in the Duke Carolina rate filing.

Duke sought an allowance for a 10.4% return. The commission’s Public Staff favored 9.55%. An expert witness for the Carolina Utility Customers Association proposed 9.4% and another for the N.C. Justice Center suggested 6.15%.

Dueling financial models that account for such things as risk, rising interest rates and inflation yielded a “zone of reasonableness” for returns between 9.99% and 10.37%. A majority of commissioners opted for 10.1%.

Other utilities in the Southeast that got rate changes in 2022 received rate-of-return allowances of more than 10%, the majority said. (Duke Progress got 9.6% from South Carolina regulators in 2023.)

A dissenting commissioner, Jeffrey Hughes, said a lower return, in the range of 9.8% to 9.9%, would’ve balanced fairness to Duke “with fairness to customers, while not negatively impacting [the utility’s access to or cost of capital.”

Selecting 9.9% would’ve shaved about $92 million off Duke’s revenues requirements over the three years, he said. Duke has said the approved increase envisioned “a net increase in retail revenues” of $774 million over the three years.

In 2023, Duke reported about $2.9 billion in net income across all its operations across the U.S.

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