Duke Energy Seeks 15 Percent N.C. Rate Hike

By Bruce Henderson
Duke Energy to offer employee buyouts

Duke Energy filed Friday for an overall 15 percent rate hike, its largest such request in North Carolina in at least 20 years.

It’s the second of three increases Duke plans to seek as it rebuilds its aging fleet of power plants. Duke also gave notice Friday that it will soon file a rate case in South Carolina.

Consumer advocates and customer groups attuned to the state’s soft economy will try to pare down Duke’s request. A hearing before the N.C. Utilities Commission is expected in Raleigh in late November.

Duke serves 1.8 million N.C. customers, most of them in the state’s western half.

N.C. residential rates would go up 17 percent, adding $19 to the average $97 monthly bill. Commercial and industrial rates would rise 14 percent.

“It’s huge. It’s a lot larger than any request that we’ve seen in a while,” said Ralph McDonald, a Raleigh attorney who represents industries.
Three-fourths of the $646 million in new revenue a year would be used to cover Duke’s $4.8 billion in building costs since 2009. Duke plans to retire 38 old coal- and gas-fired generating units by 2015 as environmental standards toughen.

Projects underway include construction of a new natural gas-fired plant, replacement of a hydroelectric plant, installation of an air-pollution scrubber at Duke’s Cliffside coal-fired power plant and construction of a new unit there.

“We tried to be as transparent as we could be about what we would be filing” to recover those costs, said Duke’s N.C. president, Brett Carter. “Those plants are going to benefit customers in a big way.”

But a rate hike won’t be easy for customers such as Charlotte resident Susan Spaulding, who lost her job nearly a year ago. Despite her best efforts, from installing a ceiling fan to cleaning her refrigerator’s coils, Spaulding said electricity costs leave her vulnerable.

“If I had it to do all over again, I probably wouldn’t get a house that’s all-electric,” she said, “because it puts you at the mercy of Duke.”
Duke won approval in 2009 for an effective rate increase of 7 percent over two years, including a 7.5 percent increase for residential customers. It was the first general rate increase for Duke since 1991.

In 2007, following its merger with Cinergy, Duke agreed to lower its rates by an overall 6 percent.

Rates in the intervening years remained basically flat. Duke says its rates now are 18 percent below the Southeast’s average.

“Relative to what (customers) have paid since 1991, and relative to Southeast and national rates, it’s a very prudent case,” Carter said.

Duke offers energy-saving tips at www.duke-energy.com/youtility.

Duke is likely to seek another increase in 2012 to complete work on its coal and gas-fired plants. Duke then plans to build an $11 billion nuclear plant near Gaffney, S.C., to open in around 2021, a move that would trigger more rate cases.

Friday’s filing “is a large case, and we will try to make sure when we make our recommendation that they receive no more than they absolutely need,” said Robert Gruber, executive director of the utilities commission’s Public Staff, which represents consumers.

General rate cases cover a utility’s day-to-day operating expenses, large capital projects and a return on investment. Duke is seeking a return of 11.5 percent, compared to the 10.7 percent it’s now allowed.

Gruber said that return appears high, based on what other utilities commissions have allowed – most of them in the low 10 percent range

Other factors also influence customers’ bills. Last year, adjustments for fuel costs dropped residential customer rates by 7.1 percent. This year, Duke is seeking adjustments that would raise rates 5.6 percent in September.
Recent demand down
As Duke builds for the future, the recession has hurt demand for its electricity. Recovering lost revenue is one factor in Friday’s rate filing.

Duke ended 2010 with a 23 percent jump in profits over the previous year. But much of that was due to unusually hot summer weather that drove up demand, earlier rate increases and recovery of financing costs for construction projects.

Duke’s retail sales in the Carolinas fell nearly 3 percent between 2000 and 2009, it reported last September. Duke projects retail growth of 1.5 percent a year from 2009 to 2030.

Duke’s intended merger with Raleigh-based Progress Energy would create the largest U.S. utility and, the companies say, save customers $600 million over five years.

This week, in Kentucky, Duke agreed on merger terms with the attorney general that include no rate increase for two years. But Duke has no power plants under construction in Kentucky as it does in the Carolinas.

Carter said the company doesn’t expect the merger and the N.C. rate hike to overlap.