What is the financial impact of this coal ash settlement?

Duke Energy will recognize a one-time, pre-tax charge of approximately $1 billion ($500 million for DEC and $500 million for DEP) in the fourth quarter of 2020. This charge will be treated as a special item and excluded from adjusted earnings per share. The settlement also means the companies will not seek recovery of about $1 billion in deferred coal ash expenditures.

How will this settlement affect Duke Energy's future earnings and cost recovery?

While the companies are foregoing recovery of $1 billion in past costs, they will retain the ability to earn a return on equity during the amortization period for deferred coal ash costs. However, the authorized return on equity for these costs will be 150 basis points lower than previously authorized rates in North Carolina rate cases during the term of the settlement. The settlement provides a defined period (through January/February 2030) for coal ash cost recovery, offering greater regulatory certainty.

What does the settlement mean for coal ash management and related environmental regulations?

The settlement includes an agreement from intervenor parties that Duke Energy's execution of the related DEQ Settlement and coal ash management plans are reasonable and prudent. This waives the intervenor parties' right to challenge historical coal ash management practices. However, they retain the right to challenge the reasonableness and prudence of actions and costs incurred to implement the DEQ Settlement's scope of work after specific dates in 2020.

When will the North Carolina Utilities Commission (NCUC) approve this settlement?

Duke Energy intends to request an expedited review from the NCUC and anticipates an order on the pending 2019 DEC rate case in the coming weeks, followed by the 2019 DEP North Carolina rate case shortly thereafter. The settlement is contingent upon NCUC approval.

DUK 8-K: Material Agreements & Financial Events

Summary

Duke Energy Corp. (DUK) announced a significant settlement on January 25, 2021, resolving long-standing coal ash prudence and cost recovery issues for its North Carolina subsidiaries, Duke Energy Carolinas (DEC) and Duke Energy Progress (DEP). This settlement, agreed upon with various North Carolina regulatory bodies and intervenor groups, aims to provide clarity on coal ash cost recovery through early 2030. Key to investors, the settlement involves a one-time, pre-tax charge of approximately $500 million per subsidiary ($1 billion total) in the fourth quarter of 2020, which will be excluded from adjusted earnings per share. This charge reflects the agreement not to seek recovery of approximately $1 billion in system-wide deferred coal ash expenditures. While the companies will retain the ability to earn a return on equity during the amortization period for these costs, the authorized return on equity will be reduced by 150 basis points compared to previously authorized rates.

Key Highlights

1Duke Energy Carolinas and Duke Energy Progress reached a settlement resolving coal ash prudence and cost recovery issues in North Carolina.
2The settlement provides clarity on coal ash cost recovery through January 2030 for DEC and February 2030 for DEP.
3A one-time pre-tax charge of approximately $500 million per subsidiary ($1 billion total) will be recognized in Q4 2020, excluded from adjusted EPS.
4The companies will not seek recovery of approximately $1 billion in system-wide deferred coal ash expenditures.
5The authorized return on equity for deferred coal ash costs will be reduced by 150 basis points in 2019 and future North Carolina rate cases.
6The settlement is subject to North Carolina Utilities Commission (NCUC) approval, with an expedited review anticipated.
7Intervenor settling parties agree that the DEQ settlement and coal ash management plans are reasonable, waiving rights to challenge historical practices.

Duke Energy CORP 8-K Report, Material Agreement (Jan 25, 2021)

Summary

Key Highlights

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