Political funds out of rate hike Duke Energy cites accounting mistake
RALEIGH — Duke Energy said Monday that it made an accounting mistake when it tried to pass on to customers more than $326,000 in political contributions to a clean-energy advocacy group and Republican Party organizations when it asked to raise electricity costs for North Carolina consumers by more than $200 million a year.
The country’s largest electric company said human error resulted in adding the political contributions to its request for a third rate increase since 2009 for customers of Duke Energy Carolinas, which serves much of western North Carolina from Durham to the Tennessee border.
The contributions mistakenly included as costs in its rate increase donations that went to the Republican Governors Association, the North Carolina and South Carolina Republican parties, and the group Strategies for the Global Environment.
The company’s admission came as the North Carolina Utilities Commission opened hearings to decide whether to allow the company to raise electricity costs by $205 million a year initially, increasing to $235 million after two years. That’s about half the $446 million Duke Energy originally requested in February. The requested rate increase was reduced in a settlement last month with the commission’s Public Staff, which represents consumer interests.
“This case is about Duke Energy Carolinas seeking recovery for power plants and other major capital improvements. The miscoded invoices were simply a mistake, and customers are not being asked to pay those costs,” Paul Newton, president of Duke Energy’s North Carolina operations, told the commission. “We’ve been through a discovery process. The process worked.”
Duke Energy said it sought the rate increase primarily to pay it back for its past investments in cleaner power plants and other equipment needed to deliver power. The company’s rate increase request said it included recovering about $2.2 billion already invested on upgrading nuclear plants, converting a power plant in Eden from coal to cleaner and cheaper natural gas, and building the coal-burning Cliffside plant in Mooresboro.
The reduced rate request allows Duke Energy Carolinas a 10.2 percent return on equity, a measure of profit allowed investors.
The group NC WARN, a frequent critic of Duke Energy, contends there are another $30 million in stock-based compensation, trade association dues, and other costs being improperly passed on to consumers in the rate request. The company disputes the claims.
A proposed settlement with the state’s official consumer advocate would allow Duke Energy Carolinas to raise rates by 4.5 percent overall, increasing to 5 percent after two years.
The cost to about 1.6 million residential customers is higher: 5 percent for two years and then 5.8 percent more after that.
That represents an increase for the average household from about $103 a month to about $110 a month after the third year of the rate increases that could begin taking effect this fall.
About 250,000 North Carolina industrial customers will pay 4.7 percent in the first two years and then 5.3 percent. The company’s nearly 5,000 commercial customers will pay 3.8 percent more for the first two years, and 4.4 percent in year three.
The utilities commission’s hearings are expected to run through Wednesday, with a decision on whether to allow the rate increase and under what conditions coming later. Lawyers representing Attorney General Roy Cooper, grocery store chain Kroger Co., environmental group Greenpeace, and large industrial power users were on hand and could question Duke Energy executives about details of the company’s request.
Consumers made their opinions about the rate hike proposal known at five public hearings held across the company’s service area and in written comments to the utilities commission.
Consumer advocates said they hoped the seven-member regulatory commission will hold down or reject the latest rate increase request, which comes at a time when North Carolina has the country’s fifth-highest unemployment rate. That goal may have been undercut by Duke Energy’s settlement with the Public Staff to ask for much less than originally sought, said Steve Hahn, a spokesman for the North Carolina chapter of AARP.
“I think the canoe has been tilted to one side by not letting the public process play out. We hope the commission still fully considers all the testimony that was provided in these hearings this spring and summer,” Hahn said at a demonstration Monday before the hearing began.