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Four agendas at play in Duke Energy’s NC rate hearing — Charlotte Business Journal

By John Downey

The principal players battling over Duke Energy Carolinas’ proposed 5.1% rate hike had significantly different ideas about what this week’s hearing before the N.C. Utilities Commission was about.

For Duke, the hearing was about $3.8 billion in new costs it must cover.

For the commission’s public staff, the state’s utility-customer advocate, it was about the how the agency’s proposed rate settlement balances Duke’s needs with those of customers.

For the N.C. attorney general’s office, the hearing was about what return on equity Duke will be allowed and whether customers can afford it.

For watchdog group NC WARN, it was about whether Duke can be trusted to honestly report costs and whether regulators will police the utility.

There were other agendas. But those four main themes dominated the proceedings in Raleigh.

Duke initially sought a 9.7% rate hike that would have raised $440 million in new revenue annually. It worked out a deal with the public staff to cut the request to 5.1%, raising $234 million.

The settlement called for allowing Duke a 10.2% return on equity. Return on equity is key to setting rates, and it was an issue the attorney general’s office took to the N.C. Supreme Court this year to get Duke’s 2012 sent back to the commission.

Assistant Attorney General Margaret Force focused on that issue in nearly five hours of cross-examination of two financial witnesses for Duke and the public staff. She contended the return on equity was unreasonably high and unfair to customers.

Duke initially asked for an 11.25% return, and the public staff wanted it limited to 9%. They compromised at 10.2%.

Force pressed the staff’s witness to justify a return that’s higher than the 9% his research had shown was reasonable.

NC WARN struck early in the rate hearing, challenging a slew of charges Duke says should be paid for by customers, leaving Duke to admit that it mistakenly tried to charge N.C. customers about $326,000 for contributions, largely to political parties and organizations. Duke took those charges out of the rate request, Duke N.C. President Paul Newton said the charges had been included in error.

NC WARN continued to hammer at the issue. Its witness, William Marcus, listed more than $549,000 in other charges he contended were improper and said the pattern of errors indicated to him they were not simple mistakes. He argued Duke should be penalized, suggesting a formula that would cost it about $10 million a year in revenue.

Newton insisted the incorrect charges were inadvertent errors and said there was no reason for a penalty.

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