The North Carolina Utilities Commission rejected Duke Energy Progress’ base rate case — in which the company requested a near-15 percent increase, or $477 million, to consumers in order to account for revenue lost due to the closures of several coal ash plants as well as damage from large storms.
Instead, the commission ordered that the company will recover just a fraction of the amount while paying multiple penalties to the commission for its mismanagement of the closures.
As a result of the order, Duke Energy will take a $100 million pre-tax charge to its first-quarter 2018 earnings, “primarily related to coal ash basin disallowance and management penalty and deferred storm cost adjustments,” a Form 8-K the company filed with the Securities and Exchange Commission stated.
“Recent changes in state and federal regulations have changed the scope and scale of ash basin closure in the Carolinas,” the company wrote on its website. “Those changes have resulted in costs that could not have been accounted for as part of this deferral.”
The commission has jurisdiction to regulate the rates and charges, and therefore any increases, over public utilities operating in North Carolina, such as Duke Energy.
While the commission stipulated the company can reclaim $232 million in deferred costs over a five-year period, or $46.4 million annually, it disallowed $9.5 million of costs related to its Asheville coal ash site. Additionally, the commission gave Duke Energy a $30 million management penalty, reducing its annual recovery of coal ash costs by $6 million annually for five years.
The company initially applied for the increase in spring 2017. In November 2017, the commission provided a settlement, which became an official order Monday.
The order also denied the company’s request to recover another $129 million in annual coal ash costs, although the company can apply for the recovery during its next rate case.
The commission reduced the company’s recovery of deferred storm costs to $51 million, directing the “five-year amortization of these costs should begin in October 2016,” but will be permitted to earn a full weighted average cost of capital during the period. Duke Energy initially requested to recover $80 million over five years.
North Carolina Utilities Commissioner ToNola D. Brown-Bland provided a dissenting opinion to the case, claiming the penalties for coal ash were not stiff enough and overbearing in the reduction of storm costs recovery.
“It is not fair to burden the consumers with rates that include costs attributable to the company’s imprudence,” she wrote, “nor is it fair to the company to disallow recovery of reasonable costs necessary to the provision of the adequate, efficient and reasonable service.”
Duke Energy’s admission to unlawful criminal activity, in which it pled guilty to four counts of criminal negligence related to coal ash pollution, should have warranted harsher punishments, Brown-Bland wrote.
The company, which operates on the New York Stock Exchange under the ticker DUK, had an opening price of $79.11 per share on Monday, dropping to $77.40 per share as Tuesday morning, a 2.2 percent decrease.
The Form 8-K can be found here. The order can be found here.
