Duke Energy seeks 9.7 percent rate hike
Feb 04, 2013 (Menafn - The Charlotte Observer - McClatchy-Tribune Information Services via COMTEX) --Typical residential bills would go up by about 14 a month under a rate increase Duke Energy Carolinas sought for its North Carolina customers Monday.
The overall 9.7 percent rate hike would be the utility's third since 2009 to bill customers for billions of dollars spent to build and upgrade power plants, install pollution controls and update transmission lines.
Company leaders have said they expect this to be the last N.C. increase Duke Carolinas seeks for several years, but it's not likely to go down easy among its 1.9 million customers in the state.
"What I'm most concerned about is what it means to people who are trying to live on a small budget," said Douglas Dickerson, state director of AARP North Carolina. Utility bills are the most sensitive topic among the group's 1.1 million members, he said.
"When a (typical bill) goes up 14, that's a squeeze. When you try to budget that against the fact that food and prescription drug prices are also going up, it just makes it that much of a tighter squeeze."
Duke counters that the 446 million in new annual revenue it's seeking will pay for more efficient power plants that pump fewer pollutants into the air.
Duke has spent 3.8 billion on capital projects since its last rate case. Among the projects are two new power plants -- the natural gas-fueled Dan River plant in Eden and the coal-fired Cliffside plant in Rutherford County -- as well as upgrades to the Oconee and McGuire nuclear plants and to transmission and distribution lines.
The increase, which would likely take effect in September, affects residential, commercial and industrial customers. Residential rates would climb the most: A typical residential bill, currently about 103, would rise by 14.
Even with that increase the rates would be below the national average and, adjusted for inflation, lower than North Carolina customers paid in 1991, Duke said.
"Electric service for our customers is an excellent value," Duke Energy's North Carolina president, Paul Newton, said in a statement. "For our typical customers, the daily cost of powering their homes is somewhere between the price of a gallon of gas and a latte from a coffee shop."
Duke expects to also ask for higher rates in South Carolina, where it has about 600,000 customers, in a couple of months.
Duke's North Carolina request is subject to negotiation with customer groups and the N.C. Utilities Commission's Public Staff, which advocates for customers. Duke cut its last rate request, for a 15 percent hike, by more than half in agreeing to a 7.2 percent increase in January 2012.
"We're going to try to make sure they get only absolutely what they need," as many Duke customers struggle in the tepid economy, said Robert Gruber, the Public Staff's executive director.
The Public Staff is likely to challenge Duke on two key issues. The first is the return on common equity, or profit margin based on the value of its power plants and other assets, that the commission allows.
Duke has asked for a return of 11.25 percent, up from the 10.5 percent now. The Public Staff is likely to recommend a return of about 9.7 percent, Gruber said.
The Staff also disagrees with Duke on how costs are allocated to different customer classes in setting rates. Duke bases them on the hottest hour of summer, when demand for electricity peaks. The Public Staff advocates using both summer and the lower winter peaks with an annual average.
Savings from its merger last year with Progress Energy shaved 25 million off the revenue request, Duke said. Those savings don't include reduced fuel costs, which are passed separately to customers.
Duke also introduced a couple of new wrinkles Monday.
A test of time-of-use rates, which rewards customers who use energy on low-demand times, will be offered to 500 residential and 250 general-service customers. Duke also plans to start charging new customers a 15 connection fee, cutting 8 million from its revenue request.
Public hearings, likely to include Charlotte, will be held before the Utilities Commission rules.
Customers were emailing complaints about the expected hike to the commission weeks before Duke announced Monday what it would seek. Most say they're struggling in a slow-growth economy.
"A rate increase for the folks we work with, low-income working folks, could come at no worse time," said Bill Rowe, general counsel and advocacy director at the N.C. Justice Center in Durham. Legislators are also moving to reduce unemployment benefits, he noted, and refusing to expand public healthcare benefits.
Hundreds of comments from people opposing the 2012 rate hike flooded the commission, and hundreds more spoke at public hearings. In settling that case, Duke agreed to contribute 11 million to low-income customer assistance.
N.C. Attorney General Roy Cooper appealed that increase to North Carolina's Supreme Court, arguing that the utilities commission didn't fully assess impacts on low-income customers. The court has not yet ruled.
Henderson: 704-358-5051 Twitter: @bhender
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