8-KOther EventsExhibits & Filings

Duke Energy CORP 8-K Report, Corporate Update (Mar 2, 2018)

Filed March 2, 2018For Securities:DUKDUKBDUK-PA

Summary

Duke Energy Carolinas (DEC), a subsidiary of Duke Energy Corp (DUK), has reached a partial settlement with the Public Staff of the North Carolina Utilities Commission (NCUC) regarding its August 2017 rate case. The settlement, if approved by the NCUC, is expected to result in an approximate $105 million annual customer rate increase before considering tax benefits, or a $45 million increase after accounting for the return of excess North Carolina state deferred income taxes over four years. This partial agreement resolves several issues, including a negotiated return on equity of 9.9% and the treatment of Customer Connect project costs. However, significant matters remain unsettled, notably the recovery of coal ash basin deferred costs, ongoing coal ash costs, the structure and costs associated with a Grid Reliability and Resiliency Rider, and the impacts of the Federal Tax Cuts and Jobs Act of 2017. DEC has also filed supplemental comments on implementing the federal tax changes. An evidentiary hearing is scheduled for March 5, 2018, to address the remaining issues and the proposed settlement.

Key Highlights

  • 1Duke Energy Carolinas (DEC) reached a partial settlement in its North Carolina rate case.
  • 2The partial settlement proposes a 9.9% return on equity, based on a 52% equity and 48% debt capital structure.
  • 3Customers will receive excess North Carolina state deferred income taxes back over four years.
  • 4The settlement results in an approximate $105 million annual customer rate increase before tax reductions, or $45 million after tax reductions.
  • 5Key issues remain unresolved, including coal ash costs and recovery, grid reliability rider, and the impact of the Federal Tax Cuts and Jobs Act.
  • 6DEC filed supplemental comments on implementing the Federal Tax Cuts and Jobs Act.
  • 7An evidentiary hearing is scheduled for March 5, 2018, with the final decision subject to NCUC approval.

Frequently Asked Questions

The primary outcome is an agreed-upon framework for a customer rate increase. While approximately $105 million in annual rate increases were initially proposed, the settlement suggests a net increase of about $45 million after accounting for the return of excess deferred tax income to customers over four years. This also includes a specific return on equity of 9.9%.

Several significant issues remain unsettled. These include the recovery of costs associated with coal ash basins (both deferred and ongoing costs), the details and costs of a new Grid Reliability and Resiliency Rider, and how to handle the financial impacts of the Federal Tax Cuts and Jobs Act of 2017.

A partial settlement has been reached, but it is subject to review and approval by the North Carolina Utilities Commission (NCUC). An evidentiary hearing to discuss both the settled and unsettled issues is scheduled to begin on March 5, 2018. The final decision timeline will depend on the NCUC's review process following the hearing.

The impact of the Tax Cuts and Jobs Act is one of the key issues that have not yet been settled in the rate case. Duke Energy Carolinas has filed supplemental comments with the NCUC proposing how it plans to implement the effects of this federal legislation, suggesting it will be a point of further negotiation and regulatory review.