Dive Brief:

• The North Carolina Utilities Commission last week handed Duke Energy a slate of rejections, ultimately ordering the utility to reduce customer rates instead of authorizing $700 million in additional annual revenue.
• The order, which ignored a settlement reached earlier this month between Duke and stakeholders, also rejected Duke's Power/Forward Carolinas grid modernization initiative and requires the utility to refund $60 million annually for four years as a result of state excess deferred income taxes.
• Regulators also hit Duke with a $70 million management penalty, in the form of a rate reduction, related to he utility's handling of coal ash cleanup in the state.

Dive Insight:

The NCUC's order runs more than 300 pages, and breaks 400 if you add in commissioners' dissents and concurrences. But the bottom line is this: Regulators denied many of Duke's proposals, including hundreds of millions in new revenue and a multi-billion grid modernization plan, and hit the utility with a $70 million coal ash penalty. But it allowed the recovery of several other costs, including coal ash cleanup expenses.

It is unclear what that means for Duke's Power/Forward Carolinas grid modernization initiative. The utility initially proposed almost $8 billion in spending but reached a settlement cutting its plan to $2.5 billion. The commission's decision concluded Duke “failed to show that exceptional circumstances exist to justify the establishment of the Grid Rider for recovery of its Power Forward costs.” 

Duke in a statement said it would "evaluate next steps, keeping in mind that it is critical to balance the needs of our customers with smart investments that keep costs as low as possible."

Vote Solar expressed support for the commission's decision to "not green-light unjustified and unnecessary spending." But Caroline Golin, the group's regulatory director and an expert witness in the case, also said "we recognize that there is still a need for a strong and transparent process to protect customers and truly build towards a modernized grid."

The utility will be allowed to recover costs associated with coal ash cleanup efforts, but regulators sent the message they were not pleased. The order included a determination that Duke's handling of coal ash “placed its consumers at risk of inadequate or unreasonably expensive service.”

The commission concluded Duke "admits to pervasive, system-wide shortcomings such as improper communication among those responsible for oversight of coal ash management." Regulators noted the penalty will be paid for by the company, not by customers.

The commission denied Duke's request to recover ongoing coal ash remediation costs, but did authorize the utility to record those costs in a deferral account until the next general rate case, "at which point the costs will be carefully scrutinized to determine the extent to which recovery from customers is appropriate."

Commissioner ToNola Brown-Bland issued a statement concurring in part and dissenting in part, registering her opposition to raising fixed monthly charges and allowing the recovery of all coal ash costs. That decision, she wrote, could leave ratepayers on the hook for over 97% of Duke's projected total waste coal ash removal costs of $2.6 billion.

Commissioner Daniel Clodfelter, in a lengthier statement, said he would prefer to disallow recovery of more than $244 million related to closure of waste coal ash storage facilities. "These amounts, in some instances, represent expenditures that were imprudently incurred and, in other instances, represent amounts that the Company imprudently failed to recover in prior rates," he wrote.