Duke seeks $120 million for phantom employees, offices in rate case
Durham, NC – Duke Energy is seeking to charge North Carolina customers up to $120 million a year to pay for laid-off employees, vacant offices and other phantom expenses. A proposed settlement in the rate case does not remedy this blatant overcharging, so NC WARN will call on state regulators to reject it when evidentiary hearings begin on July 8.
The overcharges reflect a practice by which Duke bases its rate hike request on expenses incurred in a previous “test year” even though future expenses are certain to be lower. As its test year, Duke chose the 12 months ending just before last July’s acquisition of Progress Energy.
Months before filing its 2013 rate hike request, Duke knew its after-merger operating expenses were running far lower than those in the test year due to the lay-off of hundreds of employees, abandonment of office space, and other merger-reduced costs.
In fact, CEO Jim Rogers boasted to investors in Duke’s 2013 annual report: “We’re also on track to achieve approximately 5 to 7 percent savings in non-fuel operating and maintenance costs.” The upper end of that range would exceed $122 million savings per year, yet Duke is trying to include most of those saved costs in customers’ rates.
In its rate case filings, Duke listed nearly 30 adjustments to the test year expenses – only a couple of which favor its customers, and which give back only a small fraction of the $122 million. But regulators have not required the Charlotte-based utility to reduce its rate request to reflect the elimination of millions in salaries and other expenses.
Electricity customers should not pay the salaries of employees who no longer work for Duke nor expenses for office buildings Duke has vacated.
Apparently a proposed settlement between Duke and regulators would have little impact on the $120 million annual overcharge. Duke claims the proposed settlement would be a plus for customers because the utility would agree to skip a year before seeking a fourth rate increase since 2009. But padding the test year with phantom revenue that will be locked in each year makes the proposed settlement a plus for Duke Energy – not its captive ratepayers.
NC WARN will insist that regulators lower Duke’s guaranteed minimum profit level so that customers don’t pay for phantom employees and empty offices.