The Pulse

NC Utilities Commission approves part of Duke’s rate hike. Here’s how you’ll pay for it.

By: - February 26, 2018 9:00 am

If for the one month you unplugged every appliance and electronic, unscrewed every light bulb, and forsook heat or air conditioning — living by candlelight, blankets or paper fans, and Sterno — you would still get an electric bill. You’ve used no power, but would have to pay Duke Energy Progress a $14  “basic charge” — the cost of maintaining the line, meter and other infrastructure to get electricity to your home.

That price used to be $11, but late Friday, the NC Utilities Commission approved an overall rate increase for DEP  customers, including a 26 percent hike in the basic charge to $14.

The 278-page ruling was released shortly before 5 p.m.

Overall, the commission cut Duke’s original request of a rate increase — an average of 15 percent based on $477 million in annual revenues — by half. But how that increase is spread among Duke Energy Progress’s industrial, commercial and residential customers is still to be determined.

In these rate cases, Duke usually brings its full corporate hubris to its ask — knowing it will not get everything it wants. (For example, the utility originally requested a $19.50 basic charge.) But the basic charge, plus Duke’s request that ratepayers cover the cost of coal ash clean up, and the repairs from storm damage were the most contentious parts of the case. It included 14 public and evidentiary hearings, with more than 140 witnesses.

Consumer advocates and the attorney general’s office had argued that commission should deny the $14 basic charge because the extra cost would harm low-income customers. The attorney general’s office also argued that “it will discourage consumers from making investments in energy efficient products and home improvements, and from taking other careful measures to budget their consumption.”

Moreover, the attorney general’s office said, the increased charge “will shift costs to small users such as low-income and elderly consumers who live in small apartments, as they are charged the same unavoidable BCC as other residential consumers who live in spacious high-consumption residences.”

DEP rebutted that the charge is necessary “because it sends the appropriate price signal to customers about the true cost of electricity.”

Low-income households, although beset by the basic charge, will benefit from a part of the settlement approved by the commission. That settlement calls for Duke to make a $2.5 million contribution from shareholder funds to the Helping Home Fund to be used for low-income energy assistance. (The NC Justice Center was among the parties seeking the settlement. Although Policy Watch is affiliated with the NCJC, it was not involved in any aspect of the negotiations, nor had prior knowledge of settlement details.)

Protesters demonstrated outside an NC Utilities Commission hearing last September. (Photo: Lisa Sorg)

The” true cost” of electricity depends on who is doing the calculating. During the hearings, DEP had argued that because customers two generations ago had “enjoyed the benefits” of coal-fired electricity, the ratepayers of today should have to cover the costs of cleaning up and storing the coal ash from that era. The commission didn’t entirely buy that line of thinking. In fact, the commission imposed a $30 million management penalty against DEP — a penalty that can’t be passed on to ratepayers.

[bctt tweet=”Duke Energy’s handling of coal ash placed its consumers at risk of inadequate or unreasonably expensive service” username=”NCPolicyWatch”]

In a statement, the commission said it assessed the penalty based on its determination that DEP’s handling of coal ash “placed its consumers at risk of inadequate or unreasonably expensive service.” In addition, the Commission found that, “DEP admits to pervasive, system-wide shortcomings such as improper communication among those responsible for oversight of coal ash management.”

Consumer and environmental advocates had argued shareholders, not ratepayers, should cover any costs of the coal ash clean up, because it was the result of the utility’s carelessness. However, the commission did find that Duke could pass along $232 million to ratepayers over the next five years — a portion of what the utility already spent to excavate and dispose of coal ash over about 20 months.

During the hearings, the company implied that it would ask its customers to cover the costs of providing bottled water to those  whose wells may have been contaminated by coal ash. In effect, the people receiving the water — some for nearly 1,100 days — would be paying for part of it, even though they were supposed to get it for free. The commission rejected any attempts by the utility to pass this cost to ratepayers.

The commission further found that DEP paid too much for coal ash removal at the company’s Asheville coal-burning plant, and therefore, denied Duke’s ask that it require its customers to pick up a $9.5 million tab.

[bctt tweet=”DEP admits to pervasive, system-wide shortcomings ” username=”NCPolicyWatch”]

The commission’s order also denied DEP’s request to assess ratepayers for the company’s ongoing coal ash remediation costs. Instead, the commission said, the utility can record these costs until its next general rate case, when they “will be carefully scrutinized to determine the extent to which recovery is appropriate.”

The “true cost” of electricity generated by fossil fuels is also evident in climate change. Extreme weather, such as more intense hurricanes, heat waves and cold snaps, are a result of these global atmospheric changes. DEP asked the commission to allow it to pass on $27 million in storm repairs to ratepayers — more than twice the amount it had been previously allowed. The utility also asked the commission to allow it to defer to customers another $49 million in one-time costs to restore damage to its infrastructure. (These are known as capital costs.)

The AARP opposed the rate hike because of its potential to harm low-income and fixed-income
senior citizens. (Photo: Lisa Sorg

But the storms that DEP mentioned as “unusual” were not just Hurricane Matthew, which occurred in October 2016. The company included other summertime severe thunderstorms, which because of climate change, are not only becoming more routine, but will likely be more frequent.

During testimony DEP acknowledged that many of the ratepayers who are being asked to reimburse the company for its storm costs “have themselves suffered severe losses in Hurricane Matthew and other storms,” the commission said. And when there are low-damage years, the commission added, ratepayers received no credit for the cost savings.

[bctt tweet=”The true cost of electricity generated by fossil fuels is also evident in climate change” username=”NCPolicyWatch”]

In its ruling, the commission wrote that it is  “concerned about the asymmetry of risk” that would exist if the DEP were allowed to pass along all costs in excess of  $12.7 million  — the basic amount used to set annual storm expenses. “In contrast, in those years when extremely severe storms such as Hurricane Matthew occur,” the commission wrote, “there is no upper limit to the costs that may be placed upon ratepayers.”

The commission denied DEP’s request to include $1.7 million damage from summertime thunderstorms in its rate increase. And overall, the commission reduced the amount DEP could spread among its ratepayers from $80.1 million, which the utility had requested, to $51 million.

Now that commission has issued its ruling, within 30 days DEP must file rate schedules, which are subject to the commission review before they become effective. The commission said that the effects of the federal tax cuts passed by Congress last year will be addressed shortly in a separate proceeding.

It’s expected the utility will make similar arguments for its rate increase during the Duke Energy Carolinas evidentiary hearings, which begin March 5.



Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Lisa Sorg
Lisa Sorg

Assistant Editor and Environmental Reporter Lisa Sorg helps manage newsroom operations while covering the environment, climate change, agriculture and energy.