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Duke Energy Progress lowers NC rate hike request as part of settlement

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Duke Energy Progress lowers NC rate hike request as part of settlement

As the North Carolina Utilities Commission begins its evidentiary hearing into Duke Energy Progress LLC's controversial revenue request, the Duke Energy Corp. subsidiary filed testimony Nov. 27 detailing a partial settlement reached with the public staff. The testimony supports a $348.5 million base rate increase with a 9.9% return on equity based upon a capital structure of 52% equity and 48% debt. Duke Energy Progress, or DEP, initially requested an ROE of 10.75%, resulting in a $477.5 million rate hike and a capital structure of 47% debt and 53% equity.

On Nov. 20, DEP notified regulators that it agreed to lower its ROE and amend the capital structure for its revenue request through a partial settlement reached with commission staff.

The staff and DEP also agreed that the utility will return its excess deferred income tax liability to customers through a rate rider over the next four years. After accounting for this refund to ratepayers, estimated at about $42.6 million annually, the net rate increase would be about $306 million for the first four years of the revenue request, according to regulatory filings. The parties have not yet reached a deal on the recovery of coal ash and storm-recovery costs.

DEP tied more than $195 million of its initial revenue requirement to coal ash pond closure costs, including $67 million for previously incurred expenses and approximately $129 million for ongoing expenses. The coal ash cost recovery would be spread over five years.

As part of its recommended $2.8 million electric base rate increase for DEP, the staff recommended the removal of more than $129 million in ongoing environmental costs and a 28-year amortization of deferred coal ash expenses. The staff said these accounting changes produce "reasonable sharing of the burden of coal ash expenditures between the company's ratepayers and its shareholders." (NCUC docket E-2, Sub 1142)