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Duke Energy pitches new way to get state approval for rate increases

April 13th, 2019

— A Duke Energy bill now before the state legislature would create a new way for regulators to approve rate increases.

The proposal follows recent decisions from the N.C. Utilities Commission denying the energy company billions in asked-for increases to cover the future costs of grid modernization projects and coal ash disposal.

Opponents fear the more front-loaded process in Senate Bill 559 would shift the risk of bad investments from the company to rate payers. The company contributed heavily to the bill draft, which it describes as a way to give customers price certainty and modernize outdated regulations with changes already in place in other states.

The bill has bipartisan support from key leaders in both legislative chambers. Environmentalists, clean energy companies and advocates for various rate payers are scrambling to oppose it, fearing it’s an end-around to circumvent a regulatory structure that has frustrated the company in recent years.

“A dangerous proposal,” said Steve Hahn, the associate state director for the N.C. AARP.

“Potentially billions of dollars,” said Peter Ledford, general counsel for the N.C. Sustainable Energy Association.

Most of the 16-page bill deals with “storm securitization,” changing the way the utility finances replacements and repairs in the wake of a major storm. That proposal has not proven controversial. But the last two pages set up a new process for the N.C. Utilities Commission to review public utility projects and approve rate increases to pay for them.

Instead of coming before the commission year after year asking for rate increases to cover projects already underway, the company could come in with a five-year plan and get preapproval for annual increases. The commission would still have to consider those projects reasonable, as it does now, and a Duke Energy spokeswoman stressed that the change would allow the commission to approve these multiyear plans, not require them.

“North Carolina regulators are still operating with tools from the past,” the company said in response to written questions about the bill. “This enabling legislation will provide the NCUC modern rate-making tools to address a rapidly changing utility industry – tools already available in over 35 states.”

Several experts said this “multiyear rate plan” structure is indeed in place in other states, but Duke Energy’s proposal doesn’t have all the protections built in that other states have used. Among other things, opponents question what happens to extra money collected if a project is abandoned or runs under budget.

“Duke is in a win-win situation, where I think this is a loser for rate payers,” Hahn said. “I think it’s important to come back every year and assess the situation.”

Last year the commission denied a $13 billion plan to upgrade the state’s electric grid, and it said that, while Duke Energy could charge customers for coal ash cleanups already underway, it couldn’t start charging them for cleanups planned for future years.

Duke Energy N.C. President Stephen De May recently told the Charlotte Business Journal that the company started work on this bill after the commission denied the grid request, but the company told WRAL News that the legislation wasn’t a result of that decision.

The proposal has powerful sponsors: The rules chairmen in both legislative chambers, the Senate majority’s deputy president pro tem, the House majority leader, the senior chairwoman of the House Finance Committee and the Democratic leader in the Senate.

Offices for most of those sponsors didn’t respond to a WRAL News request for a plain-language explainer on the complicated bill. State Sen. Ralph Hise, the deputy pro tem, said the commission would still have to determine that projects are in the public interest.

“The major point that we’d take issue with is that this is an end-run around the utilities commission,” Hise, R-Mitchell, said in an email. “That’s not the case.”

Senate Minority Leader Dan Blue’s chief of staff, Fred Aikens, said the senator is aware of concerns with the bill, and that it should get a full vetting in committee. He said that Blue, D-Wake, considers the bill “a good tool for the utilities commission to add to what they already have.”

Hise and Aikens both said the bill is likely to change as it goes through the legislature’s committee process.

“As with any bill, this is just a starting point,” Hise said in his email.

The House version of this bill is House Bill 624, but the Senate is expected to act on its version, Senate Bill 559, first.

It’s slated to be heard by the Senate Finance Committee Wednesday afternoon.

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