Duke Energy's request to raise residential electricity rates by 11.6% in North Carolina came under intense questioning from state regulators during a seven-hour hearing on Wednesday, with commissioners challenging whether the utility is unfairly shifting the burden of its massive capital spending plan onto homeowners while data centers reap the benefits. North Carolina Utilities Commissioner Tommy Tucker pressed Duke executives on how residential customers are expected to pay for "roughly $100 billion" in investments by 2035 when the utility's large-load queue is 70% data centers. The hearing centers on Duke's capital spending plan of $103 billion announced earlier this year, which company officials called the largest spending plan on file at any regulated U.S. utility.
Duke originally requested an 18% residential rate hike but lowered its request to 11.6% after pushback from customers and state Attorney General Jeff Jackson. The utility also revised its requested return on equity from 10.95% to 10.48% in what Thomas Heath, corporate finance director at Duke Energy Business Services, called "a recognition of affordability concerns." An energy expert witness for the Attorney General's office testified in June that Duke's approach "shifts significant costs and risks onto other ratepayers." A confidential exhibit presented during the hearing showed that about 98% of financial benefits from Duke's grid improvement plan projects accrued to non-residential customers, according to questioning by David Neal, a senior attorney with the Southern Environmental Law Center.
Commissioner Tucker told Duke executives during the hearing, "I understand the payouts from the data centers running 24/7/365, I understand the profitability there for Duke and the return on investment. But then with my customer shoes on, we're in the middle of a rate case, so I don't see how you can say that we're benefiting customers." Heath defended the utility's position by saying that the proposed rate hike was "beneficial to customers in the long term" and warned that a lower return on equity could lead to a credit downgrade. Attorney General Jackson said in a June 22 release that while Duke agreed to lower its request, "the new rate is still too high. Our case is about lowering this rate hike and making sure rates for data centers and other large users are handled in a way that is fair to families."
Heath argued that if Duke's return on equity drops too low, it could trigger a credit downgrade with "consequences to customers through higher borrowing costs, and ultimately, over time, through a higher ROE required to entice equity investors to make future investments in the company." He said Duke needed to maintain what the company considers "the low end of what we can absorb and maintain the long-term financial health of the utility." Heath also pointed to Duke's ability to "raise significant amounts of capital" after Hurricane Helene in 2024 to fund restoration work "efficiently and effectively, because of the credit strength at the utilities." When David Neal asked Brent Guyton, Duke's director of distribution asset management, what customer class caused the grid improvement plan projects that overwhelmingly benefit non-residential customers, Guyton responded, "We do these projects for all customers." The hearing continued Thursday, and the commission has until Sept. 20 to make its decision about the case.