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Duke Energy agreed Tuesday to pare its proposed 12.6 percent rate hike for N.C. customers to 7 percent, phased in over two years.
The N.C. Utilities Commission would have to approve the compromise between Charlotte-based Duke and the commission's customer-advocacy arm, called the Public Staff. The commission is scheduled to begin a hearing on the rate request today in Raleigh.
Average monthly bills for residential customers would go up $3.70 in 2010 and $3.61 in 2011, or 7.5percent overall, Duke said. Its initial proposal would have raised residential bills 13.5 percent, or $11.73 a month, beginning in January.
The base-rate increase would be the first since 1991 for Duke's 1.8million N.C. customers.
Public Staff executive director Robert Gruber said it compared Duke's proposal to what utility commissions in other states had allowed. The settlement gives Duke a 10.7 percent return on equity, similar to the 10.6 percent Ohio granted the company in March.
Duke also agreed to temporary measures, such as delaying recovery of financing costs for expanding its Cliffside coal-fired power plant, that will soften the impact on consumers. Those measures effectively reduce an overall 8 percent increase to 7 percent for 2010 and 2011, then rise to 8 percent in 2012.
"Instead of winding up with a $315 million (revenue) increase, they get $276 million," Gruber said. "We think we're doing a good thing by taking advantage of the (measures) to mitigate the impact and come up with a pretty fair agreement, we think, for consumers."
Gruber said he expects some among the nine other formal parties to the rate case to agree to the settlement.
The N.C. Attorney General's staff, which also represents consumers, has asked for a delay in today's hearing to allow more time to analyze the agreement.
"We're talking with them. We haven't signed off on it yet," added Ralph McDonald, a Raleigh lawyer representing some of Duke's industrial customers, which use large amounts of electricity. "We still have a little ways to go."
Duke says it needs more revenue to pay for nearly $4.8 billion in power-plant upgrades since 2006. The increase will also shore up the utility's balance sheet, it said, reassuring Wall Street investors and giving Duke access to favorable credit terms during its building surge.
Duke had initially asked permission to increase its revenues by $496 million.
"We believe this agreement is a reasonable compromise that benefits our customers and the company," Jim Turner, president of Duke's regulated electric and gas operations, said in a statement. Turner said the agreement strikes a balance between a recession-battered economy and the company's growing capital expenses.
In the settlement, Duke agreed to not file another rate case before 2011, instead of in 2010 as expected. Duke also agreed to provisions related to fuel costs, coal inventories and nuclear plant insurance costs, further lowering the rate increase.
