The Locker Room

Why aren't our electricity rates going down?

Posted by Paul Chesser at 08:39 AM

According to long-ago settled rate cases with the North Carolina Utilities Commission, Progress Energy and Duke Energy are allowed only a 12.5 percent rate of return on equity (Progress's may be slightly off that mark). So when the two utilities reached an agreement in 2002 with government regulators and legislators on the Clean Smokestacks law, which requires them to add emissions-reducing "scrubbers" to their coal-fired power plants, they accepted a rate "freeze" even though they would each have to spend hundreds of millions of dollars on the pollution controls. This raised suspicions here at the Locke Foundation and at places like the Carolina Utility Customers Association, who thought that somehow Progress and Duke were really earning more than the legally-allowed rate cap.

Well, now The News & Observer reports today that the costs of adding the scrubbers is even higher than the utilities originally thought:

Progress Energy's cost to clean up coal-burning power plants in the Carolinas could top $1.35 billion, company officials told the N.C. Utilities Commission Tuesday.

Customers could end up paying $542 million of the total cost of complying with a 2002 environmental law, according to Progress Energy's estimates. Customers' share would range from $1.25 to $1.50 more for the typical household's monthly bill.

Still, the Raleigh-based electric utility says it doesn't expect to raise rates. Progress Energy rates, last set in 1988 in North Carolina, have allowed the company to spend more than $4 billion on power plants, transmission lines and other system upgrades without having seeking higher rates.

"We have no plans for a rate case in the foreseeable future," said Progress Energy spokesman David McNeil.

How can this behavior be explained, when your costs skyrocket yet you don't pass it on to your customers? Can you come to any other conclusion than that the rate "freeze" was a fraud, and that if the Utilities Commission was doing its job, Duke and Progress would have had another rate case more recently than 19 years ago and everyone would have lower electricity bills as a result?

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