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Utilities Chair Deadbolts the Door on Duke Energy’s Backroom Deal — News Release from NC WARN

Finley protects secret deal-making from public scrutiny in rate case by using a false argument
to gut cross-examination of key witness

Statement by Executive Director Jim Warren:

DURHAM, NC – After a week of damaging revelations about millions in “erroneous” overcharges by Duke Energy, NC Utilities Commission Chairman Ed Finley severely limited the rate case trial at a crucial moment last Friday, and used a false statement to do it. By disallowing NC WARN from questioning a witness about key aspects of the backroom deal-making that led to a proposed settlement between Duke and the Commission’s Public Staff, Finley effectively prevented public scrutiny of the deal and the actions of the publicly-paid employees who made it.

If the Public Staff and Finley felt clean about that deal, they would have been eager to justify it openly, especially after all the criticism before and during the week-long evidentiary hearing. Instead, it seemed that they sought at every chance – with Duke’s assistance – to limit discussion and prevent clarity on the issues. Finley’s coup de grâce was to shut down exploration of the key witness supporting the settlement, based largely on a lie.

THE BACKDROP

As NC WARN kept revealing more during the week about Duke’s overcharging for lobbying, air travel, sponsorships, and much more, the Public Staff and Duke were clearly doing damage control, seeking to have the news stories be about “mistakes” totaling merely a million dollars or less.

Meanwhile, NC WARN kept emphasizing that the overcharging is far larger, due in part to the $100 million-plus in annual Duke expenses that the Public Staff had rejected in reaching the proposed settlement. In written pre-trial testimony, Staff witness Katherine Fernald had referred multiple times to Duke’s “errors,” millions of dollars that all happened to fall in Duke’s favor.

We had also pointed to a pattern of overcharges – for many of the same items – that extended back to Duke’s 2009 and 2011 rate cases. And we contend that the Public Staff, after catching the $100 million in unallowable charges, then gave back some $48 million in sweeteners – along with many millions more in guaranteed profits – so that Duke would agree to settle. The sweeteners were alluded to in Fernald’s pre-filed testimony and during cross-examination of Duke-NC President Paul Newton.

LOCKING THE DOOR

As noted, the Public Staff removed millions – from over 20 Duke accounts – that they deemed improper. But unlike in previous cases, the only amounts showing in the settlement summary were those resulting from the Staff’s haggling with Duke: the final positions. Our cross-examination intended to determine the Staff’s opening position – the full amount they thought was proper for each of the accounts. That’s the only way to know how much Duke really sought to overcharge customers, and how much the Public Staff conceded in reaching settlement.

In opening his cross-examination of Staff witness Fernald, NC WARN attorney John Runkle emphasized that in previous cases, the Staff’s opening positions were appropriately and clearly divulged. But when he began questioning her about those opening positions in the current case, the Staff’s lead attorney objected several times, and Finley brusquely sustained him without allowing Runkle to debate why the questioning was proper.

In closing that door, Finley falsely told Runkle that NC WARN had earlier passed up a chance to participate in settlement negotiations. In fact, we had been told by the Public Staff twice that no negotiations were underway, that there would be no settlement, and that the case would go to full trial. Finley had no reason to assert that we had been offered a chance to negotiate. He also knew that NC WARN, AARP-NC and Greenpeace had very publicly denounced the proposed settlement after its mid-June announcement largely because we had been shut out.

Finley’s block of our cross-examination makes it impossible to know how much the Public Staff gave away to Duke Energy to close the deal, and how many millions in annual overcharges Duke could get away with, depending on the Commission’s final order.

Ironically, this rate case could boost NC WARN’s ongoing court case to modify the Duke-Progress merger because we learned that Duke attempted to charge at least $13 million in merger expenses that were explicitly unallowable.

REGULATORY INDEPENDENCE?

All utilities commissioners, their staff, and the public staff are paid with public money, so they are accountable to the people of North Carolina. After witnessing their orchestrations this week, NC WARN is even more concerned about Duke Energy’s control over our state government.

Those concerns are amplified after learning last week that recently retired Public Staff director Robert Gruber, while in office, joined Duke Energy officials on golf outings at resorts such as Bald Head Island.

The Commission and Public Staff’s statutory duty is to require monopoly-protected Duke Energy to provide least-cost service and help customers save power, and some of them dutifully pursue that mission. But it seems that the deciders are committed to supporting Duke Energy’s business plan.

They allow Duke to raise rates nearly every year to keep building fracking-gas, coal and nuclear power plants we don’t even need, while impeding the growth of climate- and rate-protecting energy saving programs along with solar and wind power, and combined-heat-and-power.

Currently, we are considering the legal options following Finley’s actions. We’ll have more analysis of the rate hearings soon, and will file a brief to the Commission within a few weeks.

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