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Duke Rate Case Proves Monopoly System is Failing North Carolina — News Release from NC WARN

Tens of millions in annual overcharges, discriminatory rates, backroom deals and poor service violate state monopoly privilege, according to NC WARN

Durham, NC – A clean-energy watchdog group is challenging Duke Energy’s monopoly control over North Carolina electricity customers and calling on regulators to reject a controversial rate hike request. NC WARN says state regulators have not held Duke to its obligations as a regulated monopoly over the course of four contentious rate increases since 2009, and that households, local governments, small businesses and the climate are suffering the consequences.

The group filed a motion this week urging the NC Utilities Commission to deny the rate hike application or to substantially modify a backroom settlement between Duke and the Commission’s Public Staff. NC WARN says that settlement was tainted by a disturbing lack of transparency throughout evidentiary hearings. The Commission is expected to issue an order in the case next month, and is also facing stiff criticism by Attorney General Roy Cooper’s office.

Before and during July hearings into Duke’s rate hike request, NC WARN repeatedly charged that Duke larded its application with millions in improper annual expenses. The Public Staff deemed tens of millions to be improper, and during the week-long hearing, Duke suffered a recurring PR nightmare by admitting to numerous errors.

The North Carolina constitution explicitly prohibits monopolies, but power companies have been allowed to operate without competition based on a stated policy of strict oversight. NC WARN told the Commission that “Duke Energy does not meet the fundamental state requirements for a regulated monopoly because it is not providing affordable and economic service to its customers.” Also, they said case law makes clear that the “Commission has no power to authorize rates that result in unreasonable and unjust discrimination.”

“We’re calling on the Commission to enforce the Public Utilities Act,” said Jim Warren of NC WARN today. “Their job isn’t to guarantee Duke’s constant growth in stock value and dividends, but to ensure adequate service at fair and reasonable rates.”

Key aspects of NC WARN’s case against the government-sanctioned monopoly:

1) Duke Energy officials verified under oath that its filing was accurate, but the rate application is loaded with costs Duke knew would be rejected. As in the last two rate cases, Duke sought to charge customers far more (in the current case, $221 million) than it was willing to accept. It appears that Duke is simply manipulating the process by seeking exorbitant costs, then haggling downward during negotiations.

2) Those same officials admitted that Duke sought at least $13 million in annual overcharges. Duke’s NC president Paul Newton and others claimed that multiple errors were “essentially moot” because Duke gave up $221 million to settle the case. NC WARN argues the overcharges are far higher, and that the $221 million settlement concession – instead of somehow whitewashing a long list of mistakes – is further proof that Duke sought to gouge customers. The group is calling for the Commission to assess millions in penalties.

3) Blatantly discriminatory practices between customer classes are prohibited, yet they continue. Allocating costs for power plants based on the single hottest hour of the year unfairly places the burden of new plants on residential and small business customers. The rate case is mostly about baseload power plants that run 24-7 and year-round – not smaller, cheaper plants that handle peak demand such as that hottest single hour.

4) With unemployment high and interest rates low, it is unconscionable for Duke and the Public Staff to raise rates repeatedly and request a guaranteed profit of 10.2 percent – especially when that profit far exceeded the maximum level the Public Staff’s own expert argued for.

5) The present way of conducting business has failed many of Duke Energy’s customers; approximately 9% of residential customers, or 140,000 families, are disconnected each year, and most are forced to pay costly reconnection fees that compound their financial challenges.

6) The Public Staff made improper concessions – most notably a “sweetener” that gave back $47 million in annual revenue – just so Duke would close the deal.

Warren added today, “This rate case keenly demonstrates the customer gouging and manipulation taking place in monopoly-captured North Carolina. We’re calling on the regulators to start holding Duke strictly accountable – and to stop the world’s largest corporate utility from manipulating rates and padding profits.”

See NC WARN’s motion

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