Political, sport sponsorships among the millions per year that Duke sought to overcharge customers, says watchdog group
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