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Duke Energy Carolinas, LLC (Duke) Request to Increase Rates for Electric Service
(Docket No. E-7 Sub 1146)

Duke Energy Carolinas, LLC (Duke), serves about 2 million retail electric customers in North Carolina. On August 25, 2017, Duke filed an application with the Commission requesting authority to increase its rates to produce additional annual North Carolina retail revenues of about $611 million. Duke seeks approval of a rate of return on common equity of 10.75%.  For an existing residential customer who uses 1,000 kilowatt-hours of power monthly, Duke’s proposed rates would increase the monthly bill from $103.96 to $122.68, an 18% increase.

Duke stated that recent work to (1) modernize its electric system, (2) generate cleaner power (including exploring nuclear development), (3) responsibly manage and close coal ash basins, (4) improve reliability, and (5) continually improve service to its customers are the primary drivers behind the Company's request to increase its rates.

In its application Duke stated that investments in generating plants and plant‑related expenses, nuclear development work, investments in transmission, distribution, and meters, a new billing system, and the Company’s requested return on equity account for the majority of the rate increase request.  In particular, $101 million of the request is related to new and existing generation facilities such as the Lee Combined Cycle gas-burning plant and two new large solar facilities; $53 million is related to the Lee Nuclear Project that Duke proposes to cancel.

The Company stated in its application that it has started complying with recently adopted federal and state rules for the handling of coal ash and the closure of coal ash basins at its power plants. The Company stated that $135 million of the requested $611 million was intended to recover ash basin closure compliance costs incurred since January 1, 2015. The Company also seeks to recover $201 million toward ongoing ash basin closure compliance costs.
The Company stated that $60 million of the requested rate increase is for costs related to its meter replacement program and a new Customer Information System.  These cost increases are partially offset by the return of a deferred tax liability of $64 million as well as a net reduction of $57 million related to other changes in revenue.

In addition to the increase in annual revenues described above, the Company requested approval of a Grid Reliability and Resiliency Rider, a mechanism that would allow Duke to change rates annually to recover ongoing costs from its “Power/Forward Carolinas” initiative. In the Rider’s first year, Duke proposed to recover about $36 million in costs related to improving the Company’s grid infrastructure and modernizing aging facilities.  Including the GRR Rider, the Company’s requested annual increase is about $647 million or a 13.6 % increase across all customer groups.

The Company also requested permission to establish regulatory assets or liabilities for: (1) coal ash basin closure costs over or under the amount established in this proceeding and those costs incurred between the cut-off date for this rate case and the effective date of new rates; (2) the deferral of Lee Nuclear Project costs incurred through the rate effective date; (3) the deferral of post in-service costs for the W.S. Lee Combined Cycle Plant; and (4) smart meter deployments. If the Commission grants these requests, Duke would be able to seek recovery of these costs in future rate-setting proceedings.  The Company also requested to recover costs associated with the beneficial reuse of coal ash disposal through its annually adjusted fuel clause rider.

Lastly, the Company asked that its August 25, 2017 request to cancel construction of the Lee Nuclear Station in Cherokee County, South Carolina,  be considered simultaneously with this rate increase request. (The Commission approved Duke’s consolidation request on October 18, 2018.)

The Public Staff – North Carolina Utilities Commission is a separate agency whose mission is to represent customers in rate case proceedings. Their accountants and engineers will investigate Duke’s request and provide expert witness testimony in this proceeding. Similarly, the NC Attorney General is authorized to represent the public in proceedings before the Commission.

 

 

 

 

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