Duke Energy Corp. executives on the company's Aug. 3 earnings call previewed upcoming rate cases for subsidiaries Duke Energy Progress LLC, or DEP, and Duke Energy Carolinas LLC, or DEC.
DEP on June 1 filed a request with North Carolina regulators to increase revenues by $477 million. The utility's first rate case since 2013, Duke Energy Executive Vice President and CFO Steve Young said the recovery would fund compliance with federal and state environmental regulations, including a wastewater treatment system at the Mayo coal plant and expenses to close coal ash basins.
The utility asked to include an estimate of the ongoing cost associated with basin closure efforts based on the actual spending last year, Young said, and the amounts spent above or below this estimate will be deferred to a future rate case.
"This approach would allow us to recover our estimated cost as incurred, reducing our financing cost and ultimately benefiting our retail customers," he said. "We believe this is a prudent approach to managing these expenses and maintaining competitive rates for our customers."
When asked about the case being a 14.9% rate increase, Duke Energy Chairman, President and CEO Lynn Good said "consistent and deliberative cost management" has already been delivered to DEP customers that will offset the hike's impact. The utility would use the revenue to invest in new solar, along with its Western Carolinas modernization project and coal ash basin closure.
"We have a demonstrated record if you look at the way we've approached rate cases in this state — really, in every state we operate in — of bringing people together to come up with a solution that works for customers and investors will ultimately be our objective and, I believe, the commission's as well. So we will work this as we've worked every case. And I have confidence that we'll deliver an outcome that makes sense for both customers and investors," Good said
Intervenor testimony is expected to be filed Oct. 20, with Duke Energy's rebuttal testimony due Nov. 6. Evidentiary hearings would begin Nov. 20, and new rates would go into effect Feb. 1, 2018, if approved.
Good said return on equity is "always up for discussion." DEP's current allowed ROE is 10.2%, and it is requesting 10.75%. "We believe in a rising interest rate environment," she said. "The 10.75[%] is a dependable ask, but ROE is always a topic of discussion, and will be in this case."
Duke Energy Carolinas on July 25 submitted a prefiling notice to state regulators, which is a 30-day notice for when the utility's actual rate case will be filed. Like Duke Energy Progress, Duke Energy Carolinas has not had a rate case since 2013.
Good also spoke favorably of recent North Carolina legislation that requires the development of more than 3,200 MW of solar in the state over the next five years. The bill, which Duke Energy strongly supported, says the company must issue requests for approval to procure 2,660 MW of new renewable energy resources.
"This was very constructive, I think — really a win-win piece of legislation, culminating from a 10-month stakeholder process and bringing not only the opportunity for growth but a reduction of cost of customers, improving reliability and opportunities for additional investment for Duke," Good said.
"Additional investment around the grid remains a priority for us, and we have laid a very strong foundation in this legislative session on the compelling business case for customers, and also the case for job creation, in North Carolina, and look for ways that we can continue to advance that agenda — not only in the legislature, but in the regulatory arena as well," she continued.
Good said Duke Energy has $400 million of capital directed toward solar investment in the Carolinas. "We do have more investment opportunities than we imagined in February," she said. "And our role will be to look at those investment opportunities, compare it to alternatives and do as much as we can in a way that delivers great returns. So I see it as a growing list of great opportunities to deploy capital that underpins confidence in the ability to grow 4% to 6%."
She added that the company plans to provide an update on capital expenditure plans in February 2018.