N Carolina regulators deny Duke Energy rate increase request

RALEIGH, N.C. — North Carolina regulators denied on Friday a request from Duke Energy to raise electric rates, ordered the utility to refund $60 million in deferred taxes to customers and fined it $70 million for the way it handled coal ash.

Serving about 2 million customers, the Duke Energy Carolinas subsidiary had requested a rate increase of an extra $472 million per year, or an average of about 8.5 percent. The request came after public hearings, a partial settlement with the state's official consumer advocate and Duke's proposal to hold on to some of the federal tax cut Congress approved last year.

The North Carolina Utilities Commission, however, ordered the taxes returned.

The commission also ordered the $70 million fine - not to be passed on to customers - because Duke Energy "placed its consumers at risk of inadequate or unreasonably expensive service" in how it handled coal ash, the waste product left over when the utility burned coal for power for decades, according to the board's more than 400-page decision.

Duke also asked to charge utility customers $1.5 billion over five years to close all storage pits holding potentially toxic coal ash. Commissioners said that wouldn't happen until the utility records the charges in a separate account that the board can scrutinize.

Duke spokeswoman Meredith Archie said the utility disagreed with some rulings, but because the order was released just before 5p.m. on Friday, she said Duke needed time to review the findings to give specifics.

"The company will evaluate next steps, keeping in mind that it is critical to balance the needs of our customers with smart investments that keep costs as low as possible and keep North Carolina competitive for the long term," Archie said in a statement.

The coal ash proposal drew bitter opposition from consumers, environmentalists and North Carolina Attorney General Josh Stein. They argue Duke Energy knew for years that it was storing its coal ash in basins that leaked contaminates into underground and surface waterways, did nothing, and now wants to sock consumers with the elevated costs of cleanup.

"The leaking ash basins have polluted lakes and rivers, have contaminated groundwater, and have left communities across the state without a permanent source of clean drinking water. Now, Duke seeks to saddle ratepayers with the multi-billion dollar bill for the cleanup of their coal ash mess," Sierra Club lawyers argued in an April regulatory filing. "The requested recovery from ratepayers is not reasonable given Duke's failure to take any reasonable steps when it came to managing its coal ash."

The company has said it handled coal ash according to normal practices, so consumers should pay because the ash was generated as part of producing electricity.

On another controversial billing issue, commissioners decided Duke Energy could recover the $480 million it paid for planning, licensing, financing and other costs for its proposed Lee nuclear plant in Cherokee County, South Carolina. It rejected a request from the utility to earn a return on the project.

About 70 percent of the costs and future electricity allocation of the proposed Lee plant were intended for North Carolina consumers, with the rest bound for South Carolina customers.

North Carolina regulators in 2011 set a $120 million cap on what Duke Energy Carolinas could expect to charge the state's ratepayers for the nuclear plant. But Duke Energy Carolinas admitted it blew past that limit, spending more than $330 million and then arguing it didn't need regulators to clear its spending beyond the cap.

The commission also turned down the company's request to start charging consumers more now so that it can improve both its transmission lines and the rest of its delivery network in the years ahead. The company projected in three years of stepped up increases its grid enhancement plan would add $91 a year to the average residential customer's bill. That's about $7.50 extra for a household paying $104 a month.

Associated Press