Duke Energy (NYSE:DUK) is modernizing the electric grid and its generation portfolio, including investing in natural gas and utility scale solar, Duke Energy Chairman, President and CEO Lynn Good said Feb. 18 during the company’s 4Q15 earnings call.
She noted that the company last year announced plans for the Western Carolinas modernization project, which would add new natural gas and solar generation.
She added, “We made updated filings for grid modernization in Indiana, and continue to advance utility scale solar investments in the Carolinas and Florida.”
According to the direct testimony of Melody Birmingham-Byrd, president of Duke Energy Indiana, an indirect subsidiary of Duke Energy, that was filed last December with the Indiana Utility Regulatory Commission, Duke Energy is requesting commission approval of its proposed seven-year Transmission and Distribution (T&D) Infrastructure Improvement Plan.
Birmingham-Byrd noted that Duke in 2014 developed a seven-year T&D Plan that was focused on the needs of the Duke Energy Indiana T&D system and the benefits such investment could provide to customers. The commission did not approve the plan, pointing out several projects that it did not consider “eligible,” and finding that more detail was needed on the projects and cost estimates for all years of the plan, she said.
She also said that in the new plan, Duke has eliminated projects that the commission found to be ineligible and focused solely on basic reliability, resiliency and modernization projects on the T&D system.
Birmingham-Byrd said that the seven-year transmission plan includes 144 distinct projects on 81 transmission lines, and work on transmission assets is included in 234 projects at 209 substations.
According to the direct testimony of Donald Broadhurst, general manager, Transmission Construction & Maintenance, with Duke Energy Business Services, a service company subsidiary of Duke Energy and a non-utility affiliate of Duke Energy Indiana, the work includes completely rebuilding some of the oldest and least reliable 69-kV transmission lines, replacing the wood poles with steel poles and installing new insulators, conductors, static wire and switches to bring lines up to modern design and reliability standards.
On other transmission lines, assessment has shown that only certain specific components need to be replaced to improve reliability, he said, adding that on those lines, the company will replace only those specifically identified components such as deteriorated poles, static wire or switches.
On the higher voltage transmission lines, Duke will replace the conductor on several 230-kV lines to correct problematic “galloping” that those lines exhibit due to the combined effect of ice accretion and strong winds, he said.
Broadhurst further noted that Duke will also replace some of the aluminum H-structures on certain 345-kV lines and install self-supporting steel dead-end structures in their place to reduce the potential number of structures that could be involved in a “cascading failure” initiated by an extremely high wind event.
Birmingham-Byrd said that the total T&D plan system improvements have an estimated capital and O&M total cost – in 2016-2022 – of about $1.8bn. Of that, total transmission system improvements have an estimated capital and O&M total cost – in 2016-2022 – of about $816m, she said.
She noted that Duke Energy Indiana is requesting approval for recovery of 80% of the T&D Plan costs through the T&D Rider, and the remaining 20% will be deferred with carrying costs to be recovered in subsequent retail electric base rate case(s). The average annual rate impact is slightly less than 1%, below the permitted 2% annual cap, she said, adding that while the company proposes that the first year of the plan be calendar year 2016, the rate impact is not expected to begin until calendar year 2017, after approval of the first T&D Rider.
Duke continues to grow renewables
During the earnings call, Good noted that in its commercial portfolio, Duke continues to grow its renewables business throughout the United States, adding that the company installed around 600 MW of new wind and solar assets last year, surpassing its original objective.
Also speaking on the call, Steve Young, executive vice president and CFO at Duke Energy, said that the company expects to invest nearly $8bn through 2020, expanding its regulated electric grid infrastructure, including improvements in technology.
“These investments will enable us to improve the reliability of the grid, reduce outages and restore service faster, and provide real-time information to our customers,” he said. “We also plan to invest around $8[bn] in new generation, including natural gas and renewable assets, as we continue to build an energy system for the future and reduce emissions even further while maintaining the service reliability our customers expect.”
He said that the company sees earnings growth accelerating in the 2018-2020 timeframe, due to several factors:
- Grid and customer investments in Ohio and Indiana added over time, recovered through rate riders later in the five-year period
- Duke’s investments in new generation in Florida and the Carolinas, as well as its gas pipeline infrastructure projects, will begin to accelerate in 2018 through 2020
- Duke will file a number of rate cases in that time period across many of its utilities in order to recover its capital investments; the company expects to file a rate case in Duke Energy Ohio in 2016, and Duke Energy Kentucky in 2017, and it expects cases in the Carolinas in the back half of its five-year plan
Duke on Feb. 18 announced 2015 full-year adjusted diluted earnings per share of $4.54 compared to $4.55 in 2014. The company also said that its full-year 2015 reported diluted earnings per share was $4.05, compared to $2.66 in 2014.
Duke said that 4Q15 adjusted diluted earnings per share was 87 cents, compared to 86 cents for 4Q14. Among other things, the company said that 4Q15 reported diluted earnings per share was 69 cents, compared to 14 cents for 4Q14.