Duke Energy rate bill clears first hurdle
A bill from Duke Energy that could change the way state regulators approve rate increases for the company cleared the first of several committees it needs to go through this session to become law.
The Senate Finance Committee passed the bill without dissent but focused only on the bill’s less controversial section. A hearing on a second section, which has drawn opposition from environmental groups, the clean energy industry and ratepayer advocates like AARP, is slated for a hearing in the Senate’s Agriculture/Environment/Natural Resources Committee as soon as Wednesday morning.
Senate Rules Chairman Bill Rabon, one of the bill’s primary sponsors, said that second section may get a rewrite before it’s finalized. He said he’s been approached by a number of bill opponents.
“It’s to be determined, but I think there might be some changes – some small changes – to get everybody comfortable,” Rabon, R-Brunswick, said Tuesday.
That section of Senate Bill 559 would let the utility ask for multi-year rate increases, setting those changes years ahead of time to help the company plan for major projects. Critics fear that the language amounts to an end-around in the regulatory process, helping the company get approval for the billions in increased revenue it’s seeking up front to clean up coal ash pits and modernize the state’s power grid.
The North Carolina Utilities Commission told the company last year that it wouldn’t approve increases for those projects until they were further along. This legislation followed, written by the company, though a Duke spokeswoman has said it wasn’t a direct result of the commission’s decisions.
Upfront approval means more risk for ratepayers, critics have said.
The bill section that the Senate Finance Committee focused on Tuesday would change the way utility companies pay for storm recovery. Duke alone rang up nearly $650 million in storm repair costs last year from two hurricanes and a winter storm, company representatives said.
Senate Bill 559 would create a new storm recovery fee, which would go on customer bills if the Utilities Commission approves. That monthly fee would raise money to pay back bonds the company takes out to finance recovery operations.
This would save customers money, bill supporters and company representatives said, because it would be cheaper to borrow money under that structure than the current one.
The company is allowed to earn a profit on construction work, which averages out to about 7 percent. The proposed method wouldn’t include that return, and the company could borrow money to deal with storm repairs at less than 3 percent interest in some cases, said Alexander Glenn, a senior vice president for state and federal regulatory legal support.
“We’re mindful of the impacts on our customers,” Glenn said.
Rabon said the new method would save customers 15 to 20 percent over time, and that it’s used in more than 20 other states. He said it might eventually be expanded in North Carolina to cover non-storm costs.
“This is new ground, but it is good ground,” Rabon said.
With debate limited Tuesday to the bill’s storm section, there was no opposition from the audience, despite the room being packed, including with groups opposed to the bill. The committee’s voice vote to advance the entire bill was unanimous as well.