Dive Brief:

• Duke Energy faced tough questions from shareholders about its long-term resource plan last week, ahead of its Q1 earnings call on Tuesday.

• Shareholders pressed the utility on its clean energy progress, including its plans to invest in natural gas well into the 2030s. "I am disappointed to learn that the tool of natural gas is under such assault," Duke Board Chair, President and CEO Lynn Good told shareholders, adding that the fuel will remain important in the transition away from coal and toward renewable resources.

• The utility's Q1 earnings on Tuesday indicated Duke intends to continue on its path to expand its natural gas infrastructure, including building the Atlantic Coast Pipeline, through its $5.6 billion five-year capital plan. The utility also said it is "highly confident" it will reduce operations and maintenance (O&M) costs $350-$450 million in 2020, as part of its COVID-19 response.

Dive Insight:

Duke has been criticized by some for its plans to build out natural gas infrastructure, as well as its perceived slow progress on other clean energy investments. That concern was echoed by shareholders during the company's 2020 shareholder meeting on Thursday, who asked the utility a number of questions related to its progress, especially relative to other utilities.

However, Duke says regional discrepencies may make it easier for some utilities to invest in renewable energy resources in the short term.

"I believe in this march to reduce carbon there will be geographic differences," Good told shareholders.

In the utility's Florida and Carolinas territories, for example, it does not have "abundant wind like other utilities who may be operating more fully in the Midwest. And so having a mix of renewables to achieve more rapid reduction more early in the period is often an opportunity presented to those who have very abundant wind resources," she said.

Duke has also been making strides in energy efficiency and overall carbon reductions, she said. "I believe what may be overlooked in this conversation is the extraordinary progress this company has made," including reducing carbon emissions 39% below 2005 levels and the ownership of 8,100 MW of renewables.

But environmental and consumer advocacy groups were quick to dismiss the regional discrepancy argument, noting that the utility's territories in North Carolina and Indiana are both suitable for wind investments.

In its latest Indiana integrated resource plan (IRP), Duke proposes to add 100 MW of wind annually from 2024 to 2037. Currently, Duke Indiana has one 100 MW wind farm.

The Citizens Action Coalition (CAC) of Indiana in its comments found the state could do much better. The group blamed faulty modeling for what it saw as an unambitious deployment plan, including an "arbitrary" 250 MW per year cap on wind resources, versus caps that exceeded 3,000 MW for natural gas additions.

"The idea that they cannot make significant investments [in] wind in Indiana is unfounded and absurd," CAC Executive Director Kerwin Olson told Utility Dive in an email, pointing to the American Wind Energy Association's assertion that Indiana has the "immense potential … to be among the leading states for wind energy."

North Carolina also has enormous potential for wind, both onshore and offshore, Jim Warren, executive director of consumer advocacy group NC Warn, told Utility Dive in an email. 

"[S]tudies have shown [North Carolina] to have the largest practical off-shore wind potential along the East Coast," he said. "Off-shore is more expensive; others are pursuing it. We also have a lot of near-shore wind potential and Duke ignores [that] when it's not actively opposing it."

The National Renewable Energy Laboratory found in a 2016 report that North Carolina has the technical potential to add 173,455 MW of offshore wind capacity.

Olson and Warren are part of a recently formed watchdog group, the Duke Energy Accountability Coalition, which includes advocacy groups from across the utility's service territory.

COVID-19 impacts

Like many other utilities across the country, Duke is expecting a moderate decline in load to continue throughout the year, particularly in the commercial and industrial sectors. That decline along with milder weather anticipated this year is expected to impact revenue slightly in 2020, Good told shareholders. 

"Our communities are experiencing a slowdown and we are beginning to see the impact of electric load in our jurisdiction," she said. The utility is projecting a $0.25 and $0.15 reduction in earnings per share this year, assuming stay-at-home policies end mid-summer, followed by a "gradual economic recovery" beginning Q3 and continuing for the remainder of the year.

To mitigate these impacts, the utility is engaging in a number of "savings initiatives" including a reduction in operations and maintenance costs, which are expected to save $0.35 to $0.45 per share.

"It's important to recognize that we are only two months into this event," said Good. "We will continue planning for a range of outcomes."

Duke also received $572 million in receivable income tax under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, something typical of many utilities and large corporations since the law passed, Jonathan Arnold, a principal on the Utilities & Power Research team at Vertical Research Partners, told Utility Dive in an email.

The CARES Act essentially accelerated the return of credits, as allowed under the Tax Cuts and Jobs Act of 2017, allowing big companies to claim those credits for either 2018 or 2019.

"This was by no means limited to utilities but applied to corporate taxpayers generally. ... [C]ompanies from a broad range of industries commented on this during earnings season," said Arnold.