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NC House amends Duke Energy-backed bill to study multiyear rate plans

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NC House amends Duke Energy-backed bill to study multiyear rate plans

North Carolina lawmakers voted Aug. 20 to amend a Duke Energy Corp.-backed bill to study the effects of using multiyear rate plans and a proposed rate mechanism.

The North Carolina House of Representatives voted 112-2 to approve Senate Bill 559 with Republican Rep. Larry Strickland's amendment to require the North Carolina Utilities Commission to investigate multiyear rate plans and "banding of authorized returns," a mechanism that would create an authorized return on equity for an electric utility that would act as a midpoint and create a range of returns based on that ROE to ensure the utility does not over-earn or under-earn.

The bill, which had moved through the legislature before getting stalled in committee due to debate over the state budget, will now go back to the state Senate for a vote.

S.B. 559 originally would have allowed utilities to seek approval of multiyear rate plans up to three years and issue bonds to finance storm costs. Under the legislation, the North Carolina Utilities Commission would have been able to approve the banding of authorized returns, and the utility would have had to file annually with the commission explaining its earned ROE for the prior 12-month period.

Duke Energy helped craft the legislation, which also establishes a financing order to allow utilities to recover storm costs through issuing bonds. Duke Energy spokesperson Grace Rountree told S&P Global Market Intelligence in May that the legislation provides the utility commission with "new, modern rate-making tools," but does not guarantee that rates would increase year over year.

"A multiyear rate plan must begin with a base rate case, always, where the utility demonstrates the prudency of all of its investments, and then the commission determines what is fair and reasonable," Rountree said.

Maryland regulators earlier in August established a working group to determine how to best implement multiyear rate plans for utilities in that state, saying it could reduce the number and frequency of rate cases and provide more certainty to customers about the timing and scale of potential rate changes.

In North Carolina, opponents of the bill had expressed concerns that the proposed rate mechanism would raise rates for Duke Energy customers across the state. "This bill, designed to punish consumers and increase profits for Duke and its shareholders, is a textbook case of 'pay-to-play' politics," Jim Warren, executive director of energy watchdog organization NC WARN, said in a statement in May.

Under the amendment, the utility commission would have 60 days to set up a stakeholder process including various players within the power sector. The commission would have to submit a report to the state legislature by March 1, 2020.

Duke Energy did not immediately respond to a request for comment on Aug. 20.