Beginning the first few weeks in February, Duke Energy customers will have to start paying a little more on their monthly power bill. The North Carolina Utilities Commission (NCUC) has officially approved Duke Energy Carolinas’ request for an average increase of 7.2 percent on the average customer’s electric rates in North Carolina.
After holding public hearings across the state, Duke Energy Carolinas and the North Carolina Public Staff reached an agreement which called for the rate hike of 7.2 percent instead of the original request of 15 percent. Public Staff, an organization affiliated with the N.C. Utilities Commission, opposed Duke Energy’s initial 15 percent rate hike, and after hearing from Tar Heels across the state, North Carolina’s Public Staff and Duke Energy agreed to the aforementioned rate reduction.
Macon County Commissioner Ronnie Beale has been adamant in his opposition for any rate hike at this time, and said although he is thankful the final increase was less than originally anticipated, it is still not the right time to increase energy rates. “We are certainly glad it wasn’t the 15 percent, but in my opinion, in this environment when we have higher than normal unemployment rates and when Macon County has a large number of elderly residents on a fixed income, it is not a good time for the increase in our economy,” said Beale.
Beale noted that although the current increase will be 7.2 percent, Duke Energy was just approved of an additional 5 percent increase for fuel tax which went into effect on Sept. 1, 2011. “I don’t know of any other business that can just increase their rates by more than 12 percent in just a matter of months,” said Beale. “And there isn’t anything we can do about it expect keep paying our power bill.”
When the electricity provider originally proposed rate increases earlier this summer, representatives cited the additional costs were to cover necessary improvements needed to better serve their customers. “Since 2009, we’ve spent $4.8 billion to modernize the system and comply with environmental regulations,” said Brett Carter, president of Duke Energy North Carolina.
“Also, we continue to aggressively manage the day-to-day costs of running the business,” he said. “For example, last year our power plants set records for operational excellence and we did it while holding operating and maintenance expenses essentially flat.”
“We are pleased the NCUC has approved the settlement. We believe the settlement balances the company’s need to recover investments made in the electric system with the reality that many of our customers face continued economic challenges,” said Carter.
“This increase is critical to the company’s ongoing modernization plan to address increasingly stringent environmental regulations and also to retire and replace aging power plants. It allows the company to maintain its strong financial position, which enables us to continue investing in a more reliable, efficient and clean electric system for our North Carolina customers.”
The official agreement between Duke Energy Carolinas and the NCUC allows an increase of electric rates in North Carolina by approximately $309 million, representing an average increase for the typical residential customer's bill (based on 1,000 kilowatthours per month) of about $7. In its decision, the commission also ordered some rate design modifications.
Additionally, Duke Energy has agreed to contribute $11 million of shareholder money to community non-profits to help low income residents in North Carolina with their energy-related costs. “The worst part about the timing of the rate increase is this year Macon County will go from receiving assistance for 1,700 to help with heating and fuel cost in the winter to only having funding to help a little more than 200,” said Beale. “I think that is great that Duke has agreed to help out by contributing some money to help with these cuts, I just hope it will be enough, because the people here in Macon County need it.”
Under the approved settlement, the company is allowed a return on common equity (ROE) of 10.5 percent with a 53 percent common equity component.
As part of Duke Energy Carolinas’ modernization plan, two new power plants will begin producing electricity for customers in 2012. As a result, the company plans to request an additional rate increase in 2012 to recover the costs of the new plants and other capital investments made on behalf of customers.
History of Rate Hike
Fred Alexander, Duke Energy’s District Manager in Western North Carolina, spoke on behalf of the company during October’s public hearing. “With a down economy it might be hard to see that this rate request is also about keeping North Carolina, including Southwestern North Carolina competitive, but it is,” said Alexander. “In today’s high tech world it is essential that manufactures, computer facilities, and other enterprises have a reliable power supply.”
The original proposed rate hikes were instantly met with disapproval from residents and public officials throughout WNC, as they could have potentially added up to $19 to the average monthly residential power bill, in a time of record high unemployment rates and a struggling economy.
Scott Burns, a Franklin resident, was the first witness to swear an oath to testify against the Duke Energy proposal in October. “I feel that the monopoly of Duke having the power here gives me no other choices in the decisions that are made,” said Burns. “A 17 percent rate increase is in my view, and the view of many people I work with, outrageous and untenable. It will create a lot of hardships. Families will not be able to make ends meet,” he said.
Cecil Bothwell, an Asheville City Councilman and a candidate currently challenging Congressman Heath Shuler for the 11th Congressional District, testified against the rate increase as well, strongly questioning the timing of the Duke request. “We are in the midst of a serious recession and this is going to affect not only individuals, families, and single mothers, but also the businesses that employ people in these mountains,” Bothwell said.
“Thank goodness we have seen a mild winter so far this year,” noted Beale. “But winter isn't over yet, and if and when it gets real bad is when we will see the real impact of these increases.”
After the public hearings, the N.C. Utilities Commission changed the proposed rate hike to 7.2 from the originally anticipated 15 percent. County officials were still opposed to the increase and urged the NCUC to reconsider the impact the increase will have on residents in WNC. The increase was officially approved on Jan. 28 and will go into effect in early February.