Duke Energy customers will see slightly higher bills starting this month as the utility pays off debts from costly hurricane and other storm damage from 2018 and 2019. But the bill increase will be smaller than it could have been, because Duke is for the first time using a new financing tool approved by the state legislature in 2019.
Duke announced Thursday that its North Carolina customers will save $300 million from what would have been a $1.6 billion total cost to pay for damage to the power grid from hurricanes Florence, Michael and Dorian and Winter Storm Diego.
The savings is due to a “storm securitization” process approved by lawmakers with bipartisan support through Senate Bill 559, which Gov. Roy Cooper signed into law in November 2019. Previously, electric utilities had to pay off storm repairs using the traditional rate increase process, which requires approval from the N.C. Utilities Commission.
SB 559 lets utilities instead create a new line item on power bills for a “storm recovery charge.” With approval from the Utilities Commission to issue bonds and add the new surcharge, Duke is able to finance the bonds at a lower interest rate because the creditors have the assurance that the surcharge will generate enough revenue to pay off the bond.
The storms in 2018 and 2019 cost Duke about $1 billion in repairs, and the company has now arranged to cover that through bonds that will cost $1.3 billion over 20 years. The previous approach to financing storm repairs would have meant $1.6 billion in principal and interest payments. Duke says it also saved more by using 20-year bonds instead of 15-year bonds.
So what does it all mean for your bill? The surcharge will start appearing on bills this month and run for the next 20 years.
Duke Energy Progress (the eastern half of the state) will charge typical residential customers who use 1,000 kilowatt hours per month about $2.44 per month.
Duke Energy Carolinas (the western half, including the Triad and Charlotte, which saw less hurricane damage) will charge typical residential customers who use 1,000 kilowatt hours per month about 49 cents per month.
The amounts could change slightly up to twice a year under the terms of the legislation, allowing Duke to match the revenue from the surcharge to its debt payments.
“We are constantly mindful of customer bills, so we’re very pleased this new cost recovery tool enabled us to drastically reduce storm repair costs for our customers,” Stephen De May, Duke Energy’s North Carolina president, said in a news release.
North Carolina has seen more storm damage in 2020 and 2021, but those costs will be handled differently for now. “Most storms will be addressed through traditional ratemaking methods – we are not planning additional storm securitization at this time,” Duke spokesman Bill Norton said. “However, if there are extraordinary storms that exceed amounts recovered through rates, Senate Bill 559 allows Duke Energy and the NCUC to consider securitization in the future too.”
