COLUMBIA — Duke Energy's two electric utilities in South Carolina want to charge their customers a combined $225 million more per year to cover the cost of infrastructure improvements, new power plants, the cleanup of coal ash and a nuclear project that never got off the ground.
The utility regulators on South Carolina's Public Service Commission will start a hearing Thursday that will decide whether the two utilities — Duke Energy Carolinas and Duke Energy Progress — get everything they've asked.
It's the first major energy case handled by the state utility regulators since they allowed Dominion Energy to take over SCANA Corp. late last year. And it brings up a familiar topic: people paying for a nuclear power project that was never completed.
The regulatory case will have a huge impact on the pocketbooks of roughly 761,000 Duke Energy electric customers in South Carolina.
The monthly bill for an average customer with Duke Energy Carolinas, which serves much of the Upstate, could increase by more than $14 per month if the utility gets its way.
Customers with Duke Energy Progress, which serves parts of the Pee Dee region, could see their monthly utility costs jump by more than $17 per month.
Duke Energy, a giant in the industry, had planned to triple the fixed price that every residential customer pays just to have their home hooked up to the electric grid. It would have dramatically increased energy costs even for the customers who use a very small amount of electricity every month.
But groups opposing Duke Energy in the regulatory case convinced the company to back off that proposal on Wednesday. They argued it would have disproportionately hit the company's poorest electric customers.
The company, however, remains at odds with the Office of Regulatory Staff — the state's utility watchdog agency — over how much it can charge customers. That includes a fight over the money Duke Energy Carolinas wants for two reactors at Lee Nuclear Generating Station that were planned but never constructed.
The company wants the ratepayers in the Upstate to pay roughly $240 million over the next 12 years for the nuclear project that was set aside as the energy markets shifted over the past decade. They are using the commission's decision to allow Dominion Energy to collect $2.3 billion for the failed V.C. Summer nuclear project to justify their plans.
No matter the outcome of the current utility case, Duke Energy is also expected to come back to the commission asking for even more money in the coming months. The company, which is worth $64 billion on Wall Street, wants to get paid upfront to upgrade thousands of miles of power lines before work on those infrastructure improvements ever begin.
Again, it will be up to the state's seven utility commissioners to decide if that's fair for ratepayers.
A public backlash
The Public Service Commission held public hearings in recent weeks to listen to Duke Energy customers voice their concerns about the current rate hike proposals.
The biggest sticking point was the company's pitch to inflate the flat fee it bills residential customers every month. Currently, Duke Energy charges homeowners a little over $8 per month no matter how much power they use. But it wanted to inflate that "basic facility charge" to more than $28 per month.
That would have ensured every residential customer paid more than $336 per year even if they don't use any electricity. Many customers voiced outrage at the idea of their monthly power bills increasing by more than 200 percent even before they flip on a light switch.
The environmental and consumer groups opposing Duke Energy argued the proposal would shift the financial costs of the rate hike onto low-income households and elderly South Carolinians who are living on fixed incomes. They also complained it would reduce the incentive for people to conserve energy and suggested the plan targeted customers with rooftop solar who don't buy as much electricity from the utility.
Ryan Mozier, Duke Energy's spokesman, said it was focused on "ensuring all customers pay their fair share."
Still, the public backlash resulted in Duke Energy's attorneys dropping that plan on Wednesday even before the hearing began. The company still wants the money. It simply agreed to extract that cost based on how much electricity people use every month.
Paying for nuclear planning
Duke Energy had dreams of building a new generation of nuclear reactors in South Carolina just like SCANA Corp., the parent company of S.C. Electric & Gas.
Duke inquired about building two new reactors outside Gaffney. It applied to the Nuclear Regulatory Commission for a license to construct the power plants designed by Westinghouse. The utility purchased land and assigned workers to begin studying plans for engineering and supply chains.
But it never actually began construction on the proposed reactors. Nonetheless, Duke Energy wants customers to pay for the decade of work they put in contemplating an expansion of its nuclear fleet.
That's why it's asking Duke Energy Carolinas' customers in the Upstate to pay $11 million per year to reimburse the company and another $9 million to cover its interest costs and profit margins.
The Office of Regulatory Staff doesn't believe the company should profit from a construction project that was never attempted. They asked the utility commission to deny the $9 million annual return the utility asked for.
Duke Energy's attorneys see it differently. They pointed to the utility commission's decision last year to allow Dominion Energy, the new owner of SCANA Corp., to profit from the $9 billion V.C. Summer nuclear debacle.
“Allowing a return would be appropriate and fair given that the costs for V.C. Summer, which were of a far greater magnitude, are being recovered with a return," they said. "To not allow a return for Lee Nuclear costs would be punitive and arbitrary.”
A push for power lines
The money Duke Energy is trying to recover in the regulatory case isn't the only thing on the company's wish list. It also floated an idea earlier this year of having customers front the bill for large upgrades to the grid that transports power to homes and businesses.
All told, Duke Energy advised the utility commissioners that it wants to charge South Carolina customers ten of millions of dollars more per year to cover the costs of beefing up towers, poles and wires. But that request will have to be handled at a different time.
Duke's attorneys relented to pressure from the Office of Regulatory Staff and agreed to debate that plan sometime between now and 2020.
The proposal, however, forecasts what could be awaiting Duke Energy customers in near future. It's part of a larger effort by utilities throughout the country to increase investment in their electric distribution systems and earn a handsome profit for their Wall Street investors at the same time.
Mosier, Duke's spokesman, said those investments would improve reliability, help avoid power outages and reduce the amount of time power is out during storms.
It would also increase the annual costs for the customers of Duke Energy Progress by $10 million per year to pay for the power line upgrades. And Duke Energy Carolinas' customers would see an even larger increase of $36 million per year.
But that's a legal battle for another day.