Supreme Court reverses Utilities Commission on Duke Energy rate increase

The state Supreme Court today reversed the N.C. Utilities Commission’s approval of a 7.2 percent rate increase for Duke Energy, saying that the Commission failed to reach its own independent conclusion that the increase was fair and reasonable to all involved, including the company’s customers.

In a unanimous decision Justice Barbara Jackson wrote:

Because we conclude that the Commission failed to make the necessary findings of fact to support its ROE determination, we reverse the Commission‘s order and remand this case to the Commission so that it may enter sufficient findings of fact.

* * *

We further note that in making its ROE determination the Commission failed to make findings of fact regarding the impact of changing economic conditions on customers.

Justice Cheri Beasley, who was not on the Court when the case was argued, did not participate in deciding the appeal.

The Commission approved the rate increase to customers in January 2012 after hearing testimony from the public and from experts and concluding that Duke Energy was entitled to a 10.5 percent return on equity (ROE) — its return on investment, which ultimately affects both rates for customers and profits to shareholders.

In reviewing the record of that testimony, the Court noted that many experts failed to even consider the impact of any increase on customers, especially given the economic climate, and found that the Commission failed to make any findings in that regard. Instead, the Court concluded:

It appears that the Commission adopted wholesale, without analysis or deduction, the 10.5% stipulated ROE, as opposed to considering it as one piece of evidence to be weighed in making an otherwise independent determination.

The case now returns to the Commission, with specific instructions from the Court to make findings relating to the impact of any increase to customers.  Wrote Justice Jackson:

Given the legislature‘s goal of balancing customer and investor interests, the customer-focused purpose of Chapter 62, and this Court‘s recognition that the Commission must consider all evidence presented by interested parties, which necessarily includes customers, it is apparent that customer interests cannot be measured only indirectly or treated as mere afterthoughts and that Chapter 62‘s ROE provisions cannot be read in isolation as only protecting public utilities and their shareholders. Instead, it is clear that the Commission must take customer interests into account when making an ROE determination. Therefore, we hold that in retail electric service rate cases the Commission must make findings of fact regarding the impact of changing economic conditions on customers when determining the proper ROE for a public utility.

 

 

 

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