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Duke CFO says company expects resolution on coal ash, rate cases in 2020


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Duke CFO says company expects resolution on coal ash, rate cases in 2020

Duke Energy Corp. expects resolution in 2020 of appeals in North Carolina and South Carolina cases involving the excavation of coal ash sites and related cost recovery, the company's CFO said.

Despite a setback, Duke Energy is moving forward with its appeal of an order from the North Carolina Department of Environmental Quality that would require the company to excavate all of its North Carolina coal ash sites.

A hearing officer in the North Carolina Office of Administrative Hearings on Aug. 2 dismissed several Duke Energy claims in ruling that the North Carolina DEQ had the legal authority to select the method of closure for ash basins owned by Duke Energy Carolinas LLC, or DEC, and Duke Energy Progress LLC, or DEP.

"Basically, the ruling dismissed claims that were about the procedure that was used by DEQ to make their decision. The appeal of the substantive issues around the actual order that DEQ came out with, that will move forward," Duke Energy Executive Vice President and CFO Steven Young said in an Aug. 6 phone interview before the company's second-quarter earnings call. "Again, in our mind, we think that the DEQ's ruling to excavate a lot of the low-priority basins provides a lot of incremental costs with no measurable environmental benefit. So, that's the substance of the appeal and that will move forward."

Duke Energy expects the case to stretch into 2020.

The company also is challenging regulatory decisions in South Carolina rate cases for DEC and DEP.

The Public Service Commission of South Carolina unanimously voted June 19 to decline to reconsider its rulings in the retail electric rate cases for the Duke Energy subsidiaries. The South Carolina PSC in separate decisions in May reduced the return on equity to 9.5% from the requested 10.5% and disallowed recovery of certain coal ash costs in proposed rate hikes sought by DEC and DEP.

Duke Energy is awaiting a final order in the cases but indicated it will likely continue its appeal of the initial order to the South Carolina Supreme Court.

"We are prepared to move forward with an appeal, but that timing is not certain at this point," Young said. "We haven't gotten the final order, and then once you get that, if we decide to move forward with an appeal, that will move down its own process. There is no set timeline for that. We will be getting into 2020, I believe, before there is any further resolution on that."

On the legislative front, Duke Energy is backing legislation that would allow North Carolina's utilities to seek approval of multiyear rate plans and issue bonds to finance storm costs.

An amended version of Senate Bill 559 advanced to the full North Carolina House of Representatives on July 8 but is sitting in committee as lawmakers debate the state budget.

"The state budget is the key issue that the legislature is grappling with right now, and until that is resolved, this piece of legislation is not going to get examined," Young said. "The session does not have a set end period or end date, so it is hard to predict when legislators will get back together ... [and] what could then occur after they deal with the budget. So, there is a bit of uncertainty with it at this point, but we feel good about the legislation."

Duke Energy on Aug. 6 reported second-quarter adjusted earnings of $1.12 per share, rising from 93 cents per share in the comparable quarter of 2018.

The results beat the S&P Global Market Intelligence consensus normalized EPS estimate for the quarter of 98 cents.

"All of our businesses grew, so we are very pleased about that," Young said.