Duke Energy 2012 Annual Report Download - page 31

PART I
11
The following is a summary of pending retail base rate case proceedings
for each of USFE&G’s regulated utilities.
Duke Energy Carolinas 2013 North Carolina Rate Case.
On February 4, 2013, Duke Energy Carolinas fi led an application with the
NCUC for an increase in base rates of approximately $446 million, or an average
9.7% increase in revenues. The request for increase is based upon an 11.25%
return on equity and a capital structure of 53% equity and 47% long-term
debt. The rate increase is designed primarily to recover the cost of plant
modernization, environmental compliance and the capital additions.
Duke Energy Carolinas expects revised rates, if approved, to go into effect
late third quarter of 2013.
Progress Energy Carolinas 2012 North Carolina Rate Case.
On October 12, 2012, Progress Energy Carolinas fi led an application with
the NCUC for an increase in base rates of approximately $387 million, or an
average 12% increase in revenues. The request for increase is based upon
an 11.25% return on equity and a capital structure of 55% equity and 45%
long-term debt. The rate increase is designed primarily to recover the cost of
plant modernization and other capital investments in generation, transmission
and distribution systems, as well as increased expenditures for nuclear plants
and personnel, vegetation management and other operating costs. The rate
case includes a corresponding decrease in Progress Energy Carolinas’ energy
effi ciency and demand side management rider, resulting in a net requested
increase of $359 million, or 11% increase in retail revenues.
On February 25, 2013, the North Carolina Public Staff fi led with the
NCUC a Notice of Settlement in Principle (Settlement Notice). Pursuant to the
Settlement Notice between Progress Energy Carolinas and the Public Staff,
the parties have agreed to a two year step-in to a total agreed upon net rate
increase, with the fi rst year providing for a $151 million, or 4.7% average
increase in rates, and the second year providing for rates to be increased by
an additional $31 million, or 1.0% average increase in rates. This second year
increase is a result of Progress Energy Carolinas agreeing to delay collection of
fi nancing costs on the construction work in progress for the Sutton combined
cycle natural gas plant for one year. The Settlement Notice is based upon a
return on equity of 10.2% and a 53% equity component of the capital structure.
Once fi led, the actual settlement agreement will be subject to approval by
the NCUC. Progress Energy Carolinas expects revised rates, if approved, to go
into effect June 1, 2013.
Duke Energy Ohio 2012 Electric Rate Case.
On July 9, 2012, Duke Energy Ohio fi led an application with the PUCO
for an increase in electric distribution rates of approximately $87 million. On
average, total electric rates would increase approximately 5.1% under the fi ling.
The rate increase is designed to recover the cost of investments in projects
to improve reliability for customers and upgrades to the distribution system.
Pursuant to a stipulation in another case, Duke Energy Ohio will continue
recovering its costs associated with grid modernization in a separate rider.
Duke Energy Ohio expects revised rates, if approved, to go into effect in
the fi rst half of 2013.
Duke Energy Ohio 2012 Natural Gas Rate Case.
On July 9, 2012, Duke Energy Ohio fi led an application with the PUCO
for an increase in natural gas distribution rates of approximately $45 million.
On average, total natural gas rates would increase approximately 6.6% under
the fi ling. The rate increase is designed to recover the cost of upgrades to
the distribution system, as well as environmental cleanup of manufactured
gas plant sites. In addition to the recovery of costs associated with the
manufactured gas plants, the rate request includes a proposal for an
accelerated service line replacement program and a new rider to recover the
associated incremental cost. The fi ling also requests that the PUCO renew the
rider recovery of Duke Energy Ohio’s accelerated main replacement program and
grid modernization program.
On January 4, 2013, the PUCO Staff fi led a staff report recommending that
Duke Energy Ohio only be allowed to recover costs related to manufactured gas
plant (MGP) sites which are currently used and useful in the provision of natural
gas distribution service. Duke Energy Ohio fi led its objection to the staff report
on February 4, 2013.
Duke Energy Ohio expects revised rates, if approved, to go into effect in
the fi rst half of 2013.
The following is a summary of recently resolved or settled retail base rate
case proceedings for each of USFE&G’s regulated utilities.
Progress Energy Florida 2012 FPSC Settlement.
On February 22, 2012, the FPSC approved a comprehensive settlement
agreement among Progress Energy Florida, the Florida Offi ce of Public Counsel
and other consumer advocates. The 2012 FPSC Settlement Agreement will
continue through the last billing cycle of December 2016. The agreement
addresses three principal matters: (i) Progress Energy Florida’s proposed Levy
Nuclear Project cost recovery, (ii) the Crystal River Unit 3 delamination prudence
review then pending before the FPSC, and (iii) certain customer rate matters. See
Note 4 to the Consolidated Financial Statements, “Regulatory Matters — Rate
Related Information,” for additional provisions of the 2012 settlement agreement.
Duke Energy Carolinas 2011 North Carolina Rate Case.
On January 27, 2012, the NCUC approved a settlement agreement
between Duke Energy Carolinas and the North Carolina Utilities Public Staff
(Public Staff). The terms of the agreement include an average 7.2% increase in
retail revenues, or approximately $309 million annually beginning in February
2012. The agreement includes a 10.5% return on equity and a capital structure
of 53% equity and 47% long-term debt.
On March 28, 2012, the North Carolina Attorney General fi led a notice of
appeal with the NCUC challenging the rate of return approved in the agreement.
On April 17, 2012, the NCUC denied Duke Energy Carolinas’ request to dismiss
the notice of appeal. Briefs were fi led on August 22, 2012 by the North Carolina
Attorney General and the American Association of Retired Persons (AARP) with
the North Carolina Supreme Court, which is hearing the appeal. Duke Energy
Carolinas fi led a motion to dismiss the appeal on August 31, 2012 and the North
Carolina Attorney General fi led a response to that motion on September 13, 2012.
Briefs by the appellees, Duke Energy Carolinas and the Public Staff, were fi led
on September 21, 2012. The North Carolina Supreme Court denied Duke Energy
Carolinas’ motion to dismiss on procedural grounds and set the matter for oral
arguments on November 13, 2012. Duke Energy Carolinas is awaiting an order.
Duke Energy Carolinas 2011 South Carolina Rate Case.
On January 25, 2012, the PSCSC approved a settlement agreement
between Duke Energy Carolinas and the ORS, Wal-Mart Stores East, LP, and
Sam’s East, Inc. The Commission of Public Works for the city of Spartanburg,
South Carolina and the Spartanburg Sanitary Sewer District were not parties
to the agreement; however, they did not object to the agreement. The terms of
the agreement include an average 5.98% increase in retail and commercial
revenues, or approximately $93 million annually beginning February 6, 2012.
The agreement includes a 10.5% return on equity, a capital structure of 53%
equity and 47% long-term debt.
Duke Energy Ohio Standard Service Offer (SSO).
The PUCO approved Duke Energy Ohio’s current Electric Security Plan (ESP)
on November 22, 2011. The ESP effectively separates the generation of electricity
from Duke Energy Ohio’s retail load obligation and requires Duke Energy Ohio to
transfer its generation assets to a nonregulated affi liate on or before December 31,
2014. The ESP includes competitive auctions for electricity supply whereby the
energy price is recovered from retail customers. As a result, Duke Energy Ohio now