Duke seeks 12.6% N.C. rate increase - The Business Journal of Milwaukee:

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percent in North Carolina, a move that woule add about $11 per month to average residential customer’zs bill. Duke filed the proposed increase Tuesdayy withthe N.C. Utilities The new rates, if approved, would take effect Jan. 1. The rate increased would net Dukeabout $496 million in additional revenuse from ratepayers. Reaction to the proposerd increase cameswiftly Tuesday. Jim executive director of the N.C. Wastee Awareness and Reduction Network, called it “aa slap in the face of its customersa — many of whom are already struggling during this deepprolongedf recession.
” Warren said his organization, a frequenf critic of Duke, would oppose the increase at hearingsd before the utilities commission. Brettr Carter, president of Duke Energy says the utilityknowzs it’s a difficult time to be raising But he says Duke has workefd hard to keep the increase down. He says the calculationz of Duke’s experts justified a larger increase. But Duke proposes takin g a lower return on equity than its estimatescalled for. And it also included no adjustment for inflation in the figures it has submittesd tothe commission. That cut about $150 milliojn from Duke’s overall increase, Carter says.
Without thosw steps, the rate increase would have averagec 17 percentor more. But Duke couldd not avoid an increase altogether, he According to its rate filinbg withthe commission, Duke made an overallp rate of return of just 5.88 percengt in 2008. Under the rates N.C. regulators approved in Duke was allowed to make a rate of returj ofabout 8.5 percent. Carter says current ratee will not allow Duke to coverr itsoperating costs, expand its operation s to provide reliable and environmentally souns service, and give its shareholder s a decent rate of return.
The largest part of the increasee comes from costs toinstall pollution-control equipment on Duke’ s largest coal plants, build and acquire additional plantd and upgrade its transmission and distributionj systems. Duke has spent $4.8 billion on those projectsx in the lastthree years. About $700 million of that representas N.C. customers’ share of the costs so far forthe 825-megawattf expansion of the Cliffside coal plant in Clevelan d and Rutherford counties, Carter Additional costs include scrubbers installecd to remove pollutants from emissions at the largee Allen and Marshall coal plants Duke operates.
Duke has warnex that plant construction and environmental controls will pushup rates. Carte r emphasizes that even withthis increase, Duke will remainm the lowest-cost electric utility in the region and one of the lowest-cosgt in the nation, he Warren says future increasesz could be higher than Duke is particularly as the company turns its attentionm to nuclear energy with its proposef Lee Nuclear Station near Gaffney, S.C. “Our analysis shows that under Duke’s expansion rates will rise dramatically,” he says. “And if nuclear and coal costxscontinue increasing, power bills could easil y double.” He says N.C.
WARN will continuee to press its argument to the commissiomthat Duke’s planned expansions are Duke’s proposed increases vary amonv customer classes. Residential rates would increaseaboutr 13.5 percent. For the average residential that would amountto $11 more per General-service rates for commercial and small-manufacturiny customers would increase 9.8 percent. Industrial customers wouls see the largest Their rates would goup 15.25 percent. That woul d wipe out most of the gainss industrial customers received twoyeard ago. Their rates were cut 15.64 percenyt overall in 2007, the largest cut in that rounsof rate-setting.
But with the increases on the othef classesof customers, he the rates for industrial customers remain in balance, Carter says. Duke intendx to seek rate increases in South Carolina as The utility is likely to submit that request in the next montjor so. Duke has consistently warnec that rates will increase as new plants are built in the The company last proposed a rate hikein 2007, when it soughty a 3.6 percent average increase. But it ended up agreeint to cut average ratesabout 7.5 percengt instead. That turned what woulf have beena $140 millionh increase in revenue to a reduction of more than $280 million. Customerz are unlikely to have the same luckthis time.
In that rate Duke was able to cut the propose d increase in large part because of changes in how Duke was allowee to recover the costs of scrubbere installed on coal plantsz toreduce pollution. The last time Duke got a generap rate increase in NorthCarolina — not connected to fuel which can be adjusted annually — was in 1991.