When Duke Energy Carolinas reached a rate settlement in South Carolina July 23, it marked the latest example of Duke Energy (NYSE:DUK) resolving an important regulatory chore, according to an assessment by Bernstein Research.
The settlement provides for a $119m annual customer rate increase, representing an 8.2% average retail rate increase, Bernstein Senior Analyst Hugh Wynne said in a July 24 assessment.
The agreement was reached between the Duke division and the South Carolina Office of Regulatory Staff (ORS), which represents consumers in the state, as well as Wal-Mart, the South Carolina Energy Users Committee and the South Carolina Small Business Chamber of Commerce.
The base rate increase will be phased in over two years, raising revenues by $80.4m in the first year and by an additional $38 million in the second year. Duke will not seek to implement new base rates in South Carolina prior to September 2015. If approved by the state Public Service Commission, rates would go into effect in September 2013.
“Over the last year, Duke Energy has successfully addressed a series of regulatory and operational challenges, effectively de-risking the stock,” according to the Bernstein review drafted chiefly by Wynne.
Most importantly, Duke settled with the North Carolina Utilities Commission, leading NCUC to end its investigation into the Progress Energy merger and the ensuing forced resignation of then Progress CEO Bill Johnson, Wynne said.
In addition, Duke reached “constructive settlements” to put $6.1bn into rate base in North Carolina and South Carolina and appointed “a new and respected” CEO in Lynn Good to succeed retiring CEO James Rogers.
Along the way, Duke decided to retire the Crystal River 3 nuclear plant in Florida and “finally commissioned” the Edwardsport coal gasification power plant in Indiana with recovery of $2.6bn in project costs for the Edwardsport IGCC, Wynne said.
