Durham, NC – NC WARN is calling for state regulators to assess millions of dollars in damages against Duke Energy Carolinas for what the watchdog group says are “egregious and pervasive” violations in the utility’s current rate case. The group says that not only has it found scores of items Duke sought to charge inappropriately to customers – which should trigger penalties – but that a proposed settlement between the utility and regulators announced last week proves that Duke sought over $200 million in annual revenue that it wasn’t entitled to.

(NOTE: The details of that settlement were released late yesterday, and are not included in NC WARN’s call for penalties to date.)

NC WARN filed preliminary testimony in the rate case yesterday by economist Bill Marcus of Sacramento-based JBS Energy, Inc. Marcus is an expert witness with 35 years of experience with utility regulation in numerous states. He described a number of explicit Duke violations, along with tens of millions of additional dollars that should not be charged to ratepayers. Among the improper charges:

• $250,000 for sponsorship of the Charlotte Bobcats basketball team
• over $270,000 of political contributions to both Democrats and Republicans
• a $4,827 luncheon tab at the NASCAR Hall of Fame
• at least $2,715 of a former Duke Carolinas CEO’s country club dues
• $62,000 in contributions to charities in Washington, DC including “charity” dinners with politicians
• $10,000 for four tickets to a posh Kennedy Center event

In one sponsorship account alone, NC WARN and Marcus claim $871,441 – 96% of the money requested – was improper. As part of this account, Duke made donations to politically oriented “think tanks” focused on strategic and international relations. As Marcus wrote in his testimony: “Duke ratepayers are expected to bear a portion of those costs so that Duke Energy can have a foreign policy?”

Jim Warren of NC WARN said today: “There are scores of expenditures that have nothing to do with Duke providing utility service to its customers. We are very concerned about a pattern … how much did Duke get away with in the past three rate cases?”

Warren said that much remains to be discovered because Duke has not turned over information sought by the watchdog group as an intervener in the case. As Marcus wrote: “Duke cannot even answer the most elementary question – whether the governmental affairs departments, which have been shown to charge political contributions and politically related charitable contributions to ratepayers – have spent money on meals and entertainment for elected or appointed officials or political party senior officials.”

He proposed minimum penalties exceeding $5 million: “… disallowance of the expense is clearly not enough. If it was not for NC WARN, the utility could have gotten away with this flagrant abuse from the highest levels of the company for years. [NC statute] G.S. 62-310 allows the Commission to bring legal action for monetary penalties for violations of the Public Utilities Act.”

To bolster its case for penalties, NC WARN filed an internal Duke training memo that warns about the importance of properly classifying expenses that are political in nature. It states, “If we don’t get it right … The commission can fine the company – potentially in the $millions.”

As Marcus wrote: “… the most serious violations are when Duke Energy Carolinas seeks recovery from ratepayers of costs that it knows are clearly outside of what is allowable to be recovered in a rate case. The fact that these violations (except for the Bobcats sponsorship) largely came from governmental affairs offices and the CEO’s office, which should conduct themselves at the highest level of ethical probity, is an aggravating factor. Duke Energy Carolinas knew it could be fined millions for conduct like this, and it should be fined millions.”

Warren added: “It is critical that people realize that overcharging during a rate case gets locked in as annual, improper revenue for Duke – paid for year after year by its captive customers. We’re eager to delve into the proposed settlement agreement and find out how much more penalty should be assessed based on the $241 million in annual revenue that Duke willingly agreed to give up in order to settle the case with the regulators.”

NC WARN Testimony in the Duke rate case, filed with the N.C. Utilities Commission

Exhibits submitted with NC WARN testimony

HOLLY SPRINGS, N.C. — An outside contractor hired to look for flaws in a Duke Energy nuclear reactor near Raleigh last year missed a quarter-inch spot of corrosion and cracking near the reactor core that forced a full shutdown last month after new eyes reviewing year-old data found the problem, federal regulators said Thursday.

Four smaller spots were fixed during a refueling last year, but the flaw that forced the May 15 shutdown at the Shearon Harris nuclear plant wasn’t found until new contractors reviewed ultrasonic tests from last year, Nuclear Regulatory Commission inspectors said during a public meeting.

The NRC said there was never radiation leakage from the reactor vessel, which contains the heat and pressure produced by the nuclear core’s energy. The plant returned to full power Sunday.

“The reason why they shut down was because they could not confirm that there was no leakage,” said Robert Williams, an NRC reactor inspector who led a team looking into why the flaw was missed last year. “Once they shut down and were able to perform the needed and required examinations, they were able to confirm there was no leakage.”

Had there been a leak from the reactor vessel as a result of such cracking, it would have been contained by backup safety systems, the NRC said.

Inspectors said they’re still trying to figure out why a pair of expert-level outside analysts independently failed to spot the problem, and why the spot wasn’t caught by later reviews of the data last year. A final NRC inspection report will be released by July 11.

See the full story

Regarding the proposed settlement, this statement is from Greenpeace, AARP NC and NC WARN

Durham, NC – The state agency that supposedly represents North Carolina electricity customers has cut a deal with Duke Energy to settle a controversial rate hike request. The NC Utilities Commission’s Public Staff announced the deal today before even considering evidence being prepared by public interest groups, businesses and local governments – and before public hearings set for Winston-Salem, Charlotte and Hillsborough.

By agreeing to settle for $211 million less than it had requested, Duke has made clear that it had originally sought to overcharge customers by that much year after year. We have no confidence that Duke isn’t getting away with millions more in unallowable expenses that would be locked in each year if the settlement is approved by the Commission.

This is the third time in four years that Duke has asked for millions in inappropriate charges, then split the difference with regulators – and the rates go up each time. The settlement, if approved, would grant an overall rate increase of about 5 percent.

Duke is clearly gaming the system by asking for twice as much as it wants, and the Public Staff is playing along by giving them half in every rate case. This deal is not good government and undermines the public’s confidence that rates are determined in a fair and transparent way.

“Seniors have been showing up at NCUC public hearings because they cannot afford annual utility increases that threaten their health and economic security. By settling before the hearings in June and July, the Public Staff is signaling that their concerns mean very little,” said AARP State Director Doug Dickerson today.

The case will still go to evidentiary hearings on July 8, but the settlement prejudices the case because the Commission routinely sides with the Public Staff. The Public Staff is essentially saying “we don’t need to hear from the consumers, nor their experts, nor await cross examination of Duke witnesses.”

That’s a lousy way to regulate a giant corporate utility.

In cutting the deal, the Public Staff also abandoned its decades-long and vigorous opposition to Duke’s method of shifting generation costs onto small customers by basing the entire year’s expenses on the single hottest hour. That allocation method, which is rarely used across the nation, allows Duke to practically give power to the largest users, thus driving up demand and perpetuating the utility’s argument to build expensive power plants that otherwise would not be needed. Meanwhile, households, small businesses and local governments get hit with continuing rate hikes.

As interveners in the case, both Greenpeace and NC WARN – and other entities – have been furiously combing through thousands of documents and will make initial filings by Monday.

Backroom deal-making – with all other parties locked out – is exactly what makes people resent the government. We are determined to work harder than ever for the public’s actual interests: affordable rates and clean, efficient energy.

Part 2: Duke uses ratepayer money to buy political favor with Dems, GOP, June 11, 2013

…stay tuned, more to come…

Rate Hike Page: Additional information on Duke Energy rate hike request

RATE HIKE HEARINGS AND TRAININGS

Duke Energy Rate Hike Hearing in Winston-Salem, Jun 19 2013 07:00 PM
Forsyth County Courthouse, Courtroom 1C
200 N. Main St.
Winston-Salem, NC

Speak Out Training Preparing for the public hearing on Duke’s proposed rate hikes.
Jun 20 2013 06:30 PM
Durham Public Library
3605 Shannon Rd.
Durham, NC

Duke Energy Rate Hike Hearing in Charlotte, Jun 26 2013 06:00 PM
Mecklenburg County Courthouse, Courtroom 5310
832 E. 4th St.
Charlotte, NC

Duke Energy Rate Hike Hearing in Hillsborough, Jul 02 2013 06:00 PM
Orange County Courthouse
106 E. Margaret Lane
Hillsborough, NC

Duke Energy Rate Hike Evidentiary Hearing and High Noon Rally in Raleigh,
Jul 08 2013 12:00 PM
N.C. Utilities Commission, Dobbs Building, Room 2115
430 N. Salisbury St.
Raleigh, NC

[NOTE: This is the second in a series of revelations as our legal team reviews thousands of documents obtained in Duke Energy Carolinas’ new rate case.]

Durham, NC – Each year, Duke Energy charges North Carolina ratepayers for money poured onto groups representing both major political parties at the federal and state levels, according to documents obtained by NC WARN during the discovery phase of Duke’s current rate hike request.

Duke spent at least $1.2 million for political and civic “sponsorships” in the 12-month period that forms the basis for the current rate hike request, and is seeking approval to keep billing North Carolina customers over half that amount each year. This does not include far higher levels invested annually for lobbying, campaign contributions and targeted philanthropy designed to mute civic criticism, topics to be covered in upcoming segments of our “Burning the Public” series.

Politically oriented recipients of NC ratepayer money include the Democratic Governors’ Association ($168,160), the Republican Legislative Campaign Committee ($50,000), the Congressional Black Caucus ($27,875), the Republican State Leadership Committee ($25,000), and the controversial, conservative ALEC – the American Legislative Exchange Council ($20,000).

As widely reported last year, Duke gave national Democrats a $10 million line of credit for holding their convention in Charlotte, home city of Duke Energy, which now bills itself as the world’s largest corporate utility. News reports indicate Duke will not be repaid, but claims its shareholders will foot the bill. We are scouring the rate case documents to see if Duke is seeking to recover any of that money from customers.

It appears that charging ratepayers for currying political favor violates federal regulatory guidelines and Duke’s own internal accounting rules. We will press the NC Utilities Commission to throw the charges out.

Far more important: When did customers give Duke Energy – which enjoys monopoly control over its North Carolina market – permission to give any of their rate money to gain favor with political parties? And, as a monopoly without competitors, what is Duke buying with that money?

See some of the most damaging Duke payments

See Part 1 of Burning the Public: Charging the Little Guy $8 million annually for industrial schmoozing

See index of entire series

This year, NC WARN celebrates its 25th anniversary. Learn about the organization’s first 15 years of successful grassroots activism in this video. We are extremely proud of our past, and even more excited about our future. A big thanks to all of our members, employees, and allies, past and present, who have made our work possible.

[NOTE: This is the first in a series of revelations NC WARN will roll out as our legal team reviews thousands of documents obtained in Duke Energy Carolinas’ new rate case.]

Durham, NC – Duke Energy is seeking to charge North Carolina households and small businesses over $8 million a year to pay for employees who service large industrial and commercial customers. Such Major Account Representatives provide zero benefit to small customers, and NC WARN will seek to have the $8 million thrown out of Duke’s rate case or charged entirely to the large customers who receive the service when evidentiary hearings begin on July 8.

In the last two rate cases by Duke and subsidiary Progress Energy, NC WARN argued that the utilities manipulate rates so that small customers – families, local governments and small businesses – are forced to pay millions in annual expenses attributable to data centers and other rich corporate customers.

Such “rate rigging” enables the utilities to offer rock-bottom rates to energy-hogging data centers, which Duke is aggressively recruiting but which create very few jobs. Also called “server farms,” big energy users like Apple, Facebook and Google help Duke argue it needs to build more power plants – a key to boosting its profits.

One example from the current rate case is Duke expense account 910, which contains over $6 million in salaries and expenses for Major Account Representatives over a one-year period. Duke seeks to charge 86% of that account to households and 12% to small business owners. Only 2% would be charged to the customers receiving the special attention.

Duke says it cannot report what was spent to wine and dine the big customers – despite two requests by NC WARN.

If successful in the rate case, Duke would lock in the $8 million (including #910 and other accounts) as an annual charge to the small customers indefinitely – even if the utility actually spends far less in any year.

Duke’s scheme to force families, small businesses and local governments to pay for employees who cater to the largest customers is a cynical corporate ploy that must be rejected.

We will soon unveil additional abuses contained in documents we have obtained as an intervener in Duke Energy’s rate case.

See index of entire series

Read what the Charlotte Observer wrote about our ad and Rogers’ response.

At the same time, Greenpeace Executive Director Phil Radford and NC WARN Executive Director Jim Warren sent a letter to Rogers, calling on him to walk his talk on climate change.

Duke is the largest corporate utility in the world and could be a climate game-changer if it will move into the 21st Century.

Help us keep the pressure on Duke Energy and CEO Jim Rogers to move decisively toward a responsible energy future.

The (previously scheduled) meeting, to be held by the US Nuclear Regulatory Commission, runs from 6:30 to 7:30pm at the Holly Springs Cultural Center, and will be preceded at 5pm by an “Open House and Poster Session.”

Among the questions the public has a right to know:

• Since Duke’s 5/15/13 report to the NRC registered the crack in the official category of involving “Potential Uncontrolled Radiation Release,” why did Duke-Progress spokespeople tell the news media the crack involved no danger to the public?
• Since we understand it is not typical (though not unprecedented) to perform such a re-evaluation of data from a year ago, why exactly was such an exercise performed?
• Following normal procedures, how many personnel are required to review the ultra-sound data?
• After last May’s testing, how many personnel did review the data?
• Describe how the NRC will investigate why the crack was missed for a year.
• On what date did Progress Energy first analyze the data? On what date was the analysis officially completed?
• Does Duke-Progress intend to charge customers for this extended outage?
• How will the NRC’s investigation specifically ensure there was no deliberate cover-up designed to protect the Duke-Progress merger? The multi-billion dollar merger was already known to be in trouble based largely on problems at Progress’ Crystal River nuclear plant; Progress CEO Bill Johnson later testified that Duke was looking for an excuse to scuttle the deal; and Duke fired Johnson based largely on problems at Progress’ fleet of nuclear plants.
• Will the NRC be able to determine if the failure to find the crack was related to corporate cost-cutting pressures, a trend NC WARN has criticized in Progress Energy management for many years?