Consumer Alliance Warns of a Doubling of Electricity Rates under Duke Energy’s Business Plan

{posted on: December 18, 2012}

Economists say a proposed “annual rate hike bill” to fund new nuclear plants would be aninterest-free loan to Duke from ratepayers – without saving any money.

Raleigh, NC – A new study by energy economists warns that North Carolina customers will see power bills skyrocket if legislators allow Duke Energy Progress to begin raising rates to pay for new nuclear reactors that would open in 2024 at best. The consumer alliance that fought off such legislation over the past two years said today that Duke’s business plan to build unneeded power plants could almost double rates by 2019 with another 50% increase over the following decade, severely impacting the state’s economy.

Consumers Against Rate Hikes (CARH), a broad alliance formed to counter Duke’s efforts to pass the annual rate hike legislation, said today that Duke, after the deciding to back off attempting to introduce the bill in the two previous legislative sessions, may well be trying to line up votes again for the 2013 legislative session. That’s because Duke CEO Jim Rogers has repeatedly and publicly stressed that without the legislation, which would let the utility raise rates every year with almost no oversight, financial risks are too high for Duke to attempt building new nuclear power plants.

Synapse Energy Economics, Inc., in the study commissioned by CARH, rejected Duke’s key talking point that the bill would somehow save customers money by charging them as the plant is being built.  Synapse author Max Chang wrote, “The project appears less costly, but only because ratepayers have already paid the financing costs … effectively an interest-free loan” to the utility.

Synapse found that early cost recovery for Duke’s proposed Lee Nuclear Station, on its own, could raise rates by 37 – 46% beyond 2009 levels, the year Duke began raising rates to cover its aggressive expansion of power plants. The Charlotte-based utility boosted residential rates by 16% during rate cases in 2009 and 2011 and plans to file for another rate increase early next year. A separate analysis of the billions more in construction costs from the Duke Energy 2012 Integrated Resource Plan and the projections from the Synapse report shows that rates could almost double by 2019 with another 50% increase over the following decade.

Another analysis using other assumptions and data has projected much higher rate increases.

Massachusetts-based Synapse reported that cost estimates for Duke’s Lee project have already doubled since 2007, and the economists warned that “the lack of transparency surrounding this project” adds to ratepayer risks.

Carley Ruff of the NC Housing Coalition speaking for CARH today noted that, “The public gets cheated if Rogers can coax our elected officials into forcing those risks onto customers’ backs – with rate hikes year after year that would hit us all, and the economy, like a series of body blows: more disconnections, more jobs lost, more foreclosures, more stress on small business and local government budgets.”

The Synapse economists said problems among current nuclear construction projects should be heeded.  The nation’s first nuclear project in a generation, Plant Vogtle, gained a construction license early this year but is already submerged in cost overruns and lawsuits between contractors and owner Georgia Power.

A similar project in Florida by Duke-Progress has suffered a quadrupled cost estimate – to over $24 billion – years before construction could begin.  That project’s earlier political supporters are now fighting to overturn the very same “annual rate hike” legislation that Duke wants from NC lawmakers.

“Duke customer rates could double even before the Lee plant would open,” said Bill Gupton, CARH Outreach Director, today, “and then we’d get another dose of rate shock.  I hope state lawmakers are wise enough to avoid this tar pit that other states have already fallen into.”

Synapse wrote, “Given these facts, we find that Duke’s ratepayers will be poorly served if North Carolina adopts early ratepayer financing under nuclear Construction Work in Progress legislation.”

A May 2012 poll commissioned by CARH showed that 86% of NC voters would oppose a law that would allow Duke and Progress Energy Corporations to increase rates annually to pay for building nuclear power plants rather than have these corporations take the financial risk.

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See the Synapse study