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Duke Energy wins N.C. rate hike

The N.C. Utilities Commission on Tuesday awarded Duke Energy Carolinas, which serves Charlotte, an overall 4.5 percent rate increase.

The hike, Duke Carolinas’ third since 2009, rises to 5.1 percent after two years. Typical residential bills will go up about $7.60 a month in 2015, to an average $110.

Duke Carolinas serves 1.9 million customers, most of them in Western North Carolina.

Paul Newton, N.C. president of Duke Energy, said higher rates are “critical to the company’s modernization plan to address increasingly stringent environmental regulations, and also to retire and replace aging power plants.”

The hike will pay for a new coal-fired unit at Duke’s Cliffside power plant west of Charlotte, and for a natural gas-fueled plant in Eden.

But Duke could face an appeal of the rate change by N.C. Attorney General Roy Cooper, who represents consumer interests.

Cooper appealed Duke’s 2011 rate hike and won, with the N.C. Supreme Court sending it back to the utilities commission for reworking. The court said the commission didn’t fully assess the impact of Duke’s profit margin on low-income customers.

Cooper’s staff insisted during July hearings that the latest rate hike would also allow Duke, the nation’s largest utility, too high a profit margin. Seniors organized by AARP, which counts 1.1 million N.C. members, filled public hearings in Charlotte and other cities.

“Duke’s evidence in this rate case regarding customer impact was not significantly or meaningfully different from the evidence Duke presented in the prior rate case,” the staff wrote last month.

In Tuesday’s ruling, the utilities commission closely followed the terms of a June settlement agreement between Duke and the commission’s Public Staff, which represents consumers.

It granted Duke an additional $205 million a year in new revenue, rising to $235 million after two years. Duke initially requested $446 million in revenue.

The commission allowed Duke a 10.2 return on equity – the profit margin Cooper had protested, but in line with returns recently granted two other North Carolina utilities.

The commission’s order devotes 28 pages to analyzing the return, quoting residents who testified against higher bills, before concluding the return is “just and reasonable” for customers.

Duke had initially sought an 11.25 percent return. The difference amounted to $112 million in new revenue. Duke has argued that a healthy return would attract favorable financing terms for the $6.5 billion it plans to spend on transmission, distribution and other upgrades over the next three years.

The commission ordered Duke to file an analysis of accounting errors that created drama during the June rate hearing in Raleigh. A Durham advocacy group, NC WARN, accused Duke of trying to inflate its revenue needs by including expenses to which it was not entitled.

Duke acknowledged accounting errors that, in part, led it to slice $510,000 off its revenue request. The utility also agreed to remove $578,000 in political contributions, sponsorships and charitable donations that the commission’s Public Staff said it should not be reimbursed.

Under terms of Tuesday’s order, Duke can’t ask for another rate increase for two years. It will also donate $10 million in shareholder money to agencies that help low-income customers struggling with energy bills.

Cooper had cited a study that ranked North Carolina sixth-highest for the 4.4 percent of disposable household income that residents spend on their power bills.

Duke will also test rate programs that reward customers for using off-peak power.

Henderson: 704-358-5051 Twitter: @bhender
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