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New Tax Hike on Electricity Should Lower Duke Energy’s Proposed Increase — News Release from NC WARN

“Tax reform” is 4th rate hike in 4 years for most Duke customers – while the largest customers remain tax-free

Durham, NC – Today, as part of the ongoing fight over a 5-6 percent average rate hike proposed by Duke Energy, NC WARN filed a motion calling for the NC Utilities Commission to consider the impacts of a new tax increase on electricity sales. The Tax Simplification and Reduction Act, signed into law on Tuesday, contains an electricity sales tax hike that represents the fourth sizeable increase on Duke customers in just four years.

Including the new tax, the average rate for Duke residential customers would rise by nearly 10 percent if the Commission signs off on a controversial, secretly negotiated settlement between Duke and the Commission’s Public Staff in the rate case.

Key points in our motion:

  • The act increases the current 3.22% tax on electricity to 7.0%, effective July 1, 2014.
  • The tax increase on electricity sales is relevant to the current Duke Energy rate case because it is a “known and measurable” impact on the electricity rates. Thus, Duke’s rate increase – especially the monopoly’s guaranteed profit level – must be adjusted to reflect the tax.
  • The act estimates the tax increase as $417 million in fiscal year 2014-15, rising to $453 million by 2017-18.
  • Residential and local governments will bear the greatest burden of the increase, as most commercial and industrial customers are able to deduct sales taxes from state and federal income taxes.
  • NC manufacturing facilities remain exempt from state tax on electricity – part of the utilities 2007 buy-off for support of the highly controversial Senate Bill 3. Passed in 2007, SB3 allows Duke to pre-charge customers for years while nuclear power plants are being built.
  • The parties in the Duke rate case should now be allowed to address the impacts of the tax rate increase on electricity rates in their proposed orders or briefs as part of this proceeding.
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