- South Carolina regulators adopted a motion on Wednesday to cut the rate hike proposal from Duke Energy Progress (DEP) about 30% from the proposed net increase requested, after stakeholders criticized the impacts of rate increases during a series of packed public hearings.
- The motion, expected to be issued as a written order in the next few weeks, was similar to a PSC order adopted May 1 on Duke Energy Carolinas' (DEC) rate hike request. The Public Service Commission (PSC) decreased DEC's proposed rate increase by 54%.
- Through the DEP-related proposal, the Public Service Commission (PSC) would restrict the contribution from South Carolina customers to executive pay, disallow the utility from recovering $333 million in coal ash costs from its North Carolina clean-up and cap the fixed charge fee that Duke sought to nearly triple, among other things.
The lowered return-on-equity rate approved by regulators is likely to impact other utilities pursuing a rate case in the state as well as Duke's filings in neighboring North Carolina. Duke executives are expected to address this during the company's Q1 earnings call with analysts on Thursday.
DEC had requested a $231 million rate increase and an ROE of 10.5%. The PSC voted on May 1 to adopt a proposal by Commissioner Tom Ervin to approve a 9.5% ROE and a nearly $107 million rate increase.
DEP had requested a $69 million rate increase, or $59 million net increase based on a rate rider, and the PSC proposal, by Commissioner Swain Whitfield, would approve a nearly $41.5 million increase. However, Whitfield's motion similarly cut DEP's 10.5% requested ROE to 9.5%.
The lower ROE is the "most significant element" of the orders, according to Thad Culley, an attorney for Vote Solar, an advocacy group that is party to both the DEP and DEC dockets.
The ROE set in South Carolina "could have an influence in North Carolina rate cases," he said, as commissions are likely to look at neighboring states and similar utilities.
Duke Energy has a higher ROE in North Carolina, currently 9.9% for its two subsidiaries, which "definitely puts some downward pressure when [Duke will] try to make their case before the commission ... that they need more," Culley said.
The PSC's motions for DEC and DEP both mentioned the recommendations of the state's Office of Regulatory Staff (ORS) regarding the lower rate increases.
The official written orders will detail the "rationale or technical basis behind the decision" to cut fixed charge increases, ROEs and more, Gudrun Thompson, senior attorney for the Southern Environmental Law Center, told Utility Dive.
Duke asked regulators to nearly triple the DEP and DEC South Carolina customers' fixed charge rate, an amount that is often hidden in customer bills and has been criticized by consumer advocates as unduly burdening low-energy usage customers.
While Duke had approved the ORS-proposed cap on a fixed charge hike, Thompson called it an exception.
"Duke and ORS are not in agreement on the coal ash costs Duke could recover and ... on the return on equity," she said. "[They] disagreed about executive compensation for what South Carolina customers would have to pay."
As with every party involved in the case, the utility is allowed to appeal the Duke Energy Progress order. Duke will evaluate next steps once the PSC issues the written order for review.
"While some items from the commission's directive are constructive, key elements are very disappointing, and we disagree with some of the findings and legal conclusions made by the commission," Ryan Mosier, Duke spokesperson, told Utility Dive via email.
The ROEs on Duke's subsidiaries also sets a precedent in South Carolina for other utilities, which would impact Dominion's expected rate case, Culley said.
"You could picture them appealing any number of items once they decide there's enough there to pull the trigger and earn an appeal," Culley told Utility Dive.
The ROE was "well below what they had presented as an acceptable range of what they considered a reasonable rate of return, but [ROEs are] tough to appeal as the commission has a lot of discretion there as finder of facts," Culley said.
Duke Energy will be preparing proposed tariffs for both of its subsidiaries to conform to the PSC's written order.