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Duke Energy Requests Rate Hike for North Carolina Customers

Duke Energy’s DUK subsidiary Duke Energy Progress recently proposed to increase electricity rates for customers residing in North Carolina. If approved by the North Carolina Utilities Commission, residential customers will have to pay an additional $5.22 a month for availing services.

Details of the Rate Hike

Per the terms of the proposal, the company aims to hike electric rates by 4.7% in the first four years and an additional 1.3% thereafter. As a result, the annualized bill for a residential customer will increase from the current rate of $10.8.27 per month to $113.49. This hike will also include an increase in the basic customer charge from $11.13 to $14.00 per month.

The average net rate increase for the first four years will be 6.2% for residential customers, 5.1 % for the small general service group, 3.1 % for medium general service group and 3.6% for large general service group. After the fourth year, the rates are expected to change to 7.3% for the residential customer group, 6.1 % for the small general service group, 4.7 % for medium general service group and 5.6% for large general service group.

Our View

The current rate request filing by the company is in sync with its aim of investing in and generating cleaner electricity by responsibly managing coal ash and improving energy reliability. This, in turn is likely to increase value for customers and shareholders for a smarter energy future.

Usually, utility providers like Duke Energy files for rate increase to recover costs of investment and thereby extend operations and provide better services. The tax reform implemented by the U.S. government last December, set the stage for this utility’s increased rate base. Notably, lower tax rate and elimination of bonus depreciation resulting in lower deferred taxes increases the rate base. As a result, the company expects to witness higher rate base growth for the same level of capital it earlier used to spend, thereby resulting in substantial earnings growth.

Notably, the company’s robust five-year capital plan and current plans of investing about $30 billion in electric utilities and infrastructural growth projects over the 2018-2022 time frame supports this notion. Webelieve such rate base increase, which in turn leads to notable earnings growth, will allow the company to duly achieve its long-term investment targets.

Price Movement

Duke Energy has lost 7.9% in the last 12 months, compared with the broader industry’s decline of 5.6%. The underperformance may have been caused by the potential volatility in market prices of fuel, electricity and other renewable energy commodities that could further create operational risks for the company.

 


 

 

Zacks Rank & Key Picks

Duke Energy currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same industry include CenterPoint Energy CNP, NextEra Energy NEE and Entergy Corporation ETR, all of them carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CenterPoint Energy pulled off an average positive earnings surprise of 11.50% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 13 cents over the past 90 days.

Entergy Corporation delivered average positive earnings surprise of 60.21% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 15 cents over the past 90 days.

NextEra Energy posted average positive earnings surprise of 4.75% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 49 cents over the past 90 days.

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