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NC Senate approves multiyear rate plans, ditches study requirement

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NC Senate approves multiyear rate plans, ditches study requirement

North Carolina lawmakers have advanced previously stalled legislation that will allow state regulators to approve multiyear rate plans for electric utilities.

The North Carolina Senate voted 26-16 on Oct. 2 to approve a conference committee substitute of Senate Bill 559 that allows Dominion Energy Inc. and Duke Energy Corp. to seek approval of multiyear rate plans and issue bonds to finance storm costs. The controversial bill would give the North Carolina Utilities Commission the authority to approve base rates and the "banding of authorized returns" for up to three years.

The latest version of the bill strips away an amendment approved in August by the North Carolina House of Representatives that would require state regulators to first study alternative rate mechanisms before they are implemented. The House must now vote on the substitute before it heads to Gov. Roy Cooper.

The NCUC also will have the authority to establish a banding of authorized returns, defined as a rate mechanism under which the commission sets an authorized return on equity for an electric utility that "acts as a midpoint and then applies a low- and high-end range of returns to that midpoint" to prevent a utility from over-earning or under-earning. The electric utility would then be required to make annual filings with the commission that outline its earned ROE for the prior 12-month period.

The banding of authorized returns "shall not exceed 100 basis points above or 125 basis points below" the authorized ROE set by the commission. If the utility's earnings come in below the low-end of the band, it can ask for a rate increase. If the earnings are above the high end of the band, the utility may be ordered to make certain infrastructure and energy efficiency investments in low-income communities and refund or credit extra earnings to its customers.

Duke Energy helped craft the legislation, which also allows utilities to securitize or recover storm costs through the issuance of bonds. The amount authorized by the commission to "repay, finance, or refinance storm recovery costs and financing costs" would be considered nonbypassable charges imposed on all retail customers that receive transmission and/or distribution service from the utility.

Duke Energy subsidiary Duke Energy Carolinas LLC on Sept. 30 filed for a $445.3 million base rate increase in North Carolina to cover "costs incurred to maintain and modernize the company's electric system" while improving reliability and restoring service after major storms.

About $36 million of the proposed rate hike is tied to Duke Energy Carolina's work to restore service to about 1.3 million customers impacted by hurricanes Florence and Michael, as well as a strong winter storm in late 2018.