NC regulator considers another Duke Energy rate hike request

RALEIGH – A week after allowing Duke Energy a rate increase that includes charges for coal ash cleanup for about half its North Carolina consumers, state regulators on Monday began considering raising prices on an additional 2 million customers.

The state Utilities Commission opened a hearing on the company’s request to charge an extra $539 million a year to customers of its Duke Energy Carolinas subsidiary in central and Western North Carolina. That translates into a 14 percent increase for the typical residential customer’s $104 monthly bill, a spokesman for the Charlotte company said.

The hearing started with lawyers questioning a Duke Energy executive about one of many thorny questions being considered – how soon to share the company’s windfall from the new federal corporate income tax cut with customers.

The requested rate increase and its 10 percent potential allowed profit margin was needed so the country’s No. 2 electricity company by total customers can continue borrowing cheaply as it faces the multi-billion-dollar price tag of cleaning up and closing storage pits for toxic coal ash, a Duke Energy consultant said.

“It’s extraordinary important for Duke Energy Carolinas to maintain its credit profile,” Duke consultant Robert Hevert said.

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Duke Energy Carolinas wants to collect nearly $1.7 billion over five years to close all its pits storing the ash from burning coal, which can contain arsenic, mercury and other heavy metals.

Late last month, the commission allowed the company’s other North Carolina subsidiary, Duke Energy Progress, to pass along most coal-ash cleanup expenses but refused to allow charges for expected, future costs. The commission also disallowed $10 million in overcharges on cleanup work at an Asheville power plant and docked Duke Energy $30 million to penalize mismanagement of coal ash, which is stored in unlined pits that pollute groundwater.

The commission allowed a 7.3 percent rate increase on Duke Energy Progress customers, reduced for four years as state income tax savings are returned. State Attorney General Josh Stein and interest groups are considering whether to challenge the Duke Energy Progress rate hike in court.

The seven-member regulatory panel also is weighing whether to make consumers pay billions of dollars for a nuclear plant that Duke Energy Carolinas won’t open.

The company last year scrapped plans to build its proposed Lee nuclear plant in Cherokee County, South Carolina. But it wants to charge North Carolina consumers nearly $640 million over 12 years for planning, licensing, financing and other costs. About 70 percent of the costs and future electricity allocation of the proposed Lee plant were intended for North Carolina consumers, with the rest bound for South Carolina customers.

Duke Energy Carolinas acknowledged it blew past a $120 million cap the North Carolina regulatory commission set in 2011 for Lee nuclear plant spending falling on the state’s ratepayers. Duke Energy Carolinas admitted it incurred more than $330 million trying to build the nuclear plant and argued it didn’t need regulators to clear spending exceeding the cap.

Duke Energy Carolinas and the state’s utility customer advocate last week agreed to terms that would cut down the company’s earlier proposal to raise power bills by $647 million a year, or almost 17 percent. The utilities commission will decide whether to approve the settlement.

The deal trims the latest rate request in many ways, including cutting out half the additional salary and benefits that had been allocated for CEO Lynn Good and four other top executives. Other trims include limiting the additional incentive pay offered to top executives, excluding half the cost increase dedicated to operating corporate jets, returning to consumers more in deferred tax payments, and reducing by $3 million what consumers would pay for Duke Energy lobbyists and expenses for its board of directors.

The legal electricity monopoly already spends – and charges to ratepayers – millions of dollars a year to lobby and influence government officials and the public, said Jim Warren, a Duke Energy critic and head of the pressure group NC WARN.

“Buying favor and distorting its public record is an essential part of Duke’s monopoly business model, which is to build power plants, pipelines and transmission towers, and raise captive customers’ rates,” Warren said in a statement Monday. “The influence money is necessary to keep it all going.”