Going clean means more ‘green’ — for electric companies

Billions in new projects to reduce emissions means ratepayers must foot the bill while utilities earn guaranteed, often double-digit, profits.

Going clean means more ‘green’ — for electric companies
Queen Greene recently spoke at a North Carolina Public Utilities Commission hearing in opposition to a proposed monthly rate increase for one of Duke’s electric companies. After paying her rent and other bills, Greene says there's little left for her monthly utility bill. (Kate Medley / for The Assembly)

Published in the Assembly

Queen Greene sent her newborn son to live with his godparents last winter. She planned to set the thermostat of her three-bedroom North Carolina home at a chilly 60 degrees to keep her electricity bill low. Greene figured that would be too cold for a baby.

Greene had moved to rural Roxboro, about 30 miles south of the Virginia border, from Durham to save money. She wound up losing her work-from-home job due to poor internet service, forcing her to commute 45 minutes back to Durham, where she made between $11 and $15 an hour.

After paying rent for the house and other expenses, that left her about $250 a month for everything else, including roughly $110 a month she was paying Duke Energy. 

“I still have to pay lights, food, gas for the car, car insurance,” Greene told North Carolina utility regulators at a March public hearing for a proposed monthly rate increase for one of Duke’s electric companies. Duke was asking for a rate hike that would have boosted bills an average of about $25 a month — or an additional $300 a year — by 2025.

Greene said she went to the hearing not for herself but to speak for others like her.

“I was nervous, but I was like, ‘No, I have to speak up and say something because if I don’t, who will?’” Greene said in an interview with Floodlight in late November. “The people who spoke saying they agree with the rate hike—they don’t have the same issues as me, they’ve got good jobs and stuff.”

The North Carolina Utilities Commission eventually signed off on a lesser amount—one that steps up to a roughly $18-a-month increase over three years. That increase started showing up on customer bills Oct. 1. Duke’s current electricity rates will more than double before the end of the decade, said Dustin Metz, a utilities engineer at the North Carolina Utilities Commission, at a recent hearing. 

A separate three-year increase for another Duke-owned electric utility in North Carolina remains on the table.

Duke, one of the nation’s largest electric companies, set the stage for this increase two years ago with the help of the North Carolina Legislature. Lawmakers enacted the Democratic governor’s wishes to have the state cut carbon emissions 70% from 2005 levels by 2030. 

Clean energy switch pricey

Like most major electric companies across the nation, Duke faces a transition to clean energy to slash greenhouse gas emissions responsible for climate change. Experts call it the most dramatic change to the industry since electrification of the United States roughly 100 years ago — and customers will be paying dearly for it. Already, ratepayers in the Southeast, including Duke customers, pay some of the highest bills in the country.

The rate hike will help finance roughly $14 billion of investments, $6.5 billion of which is money already spent. Roughly 75% of the money collected will go towards improving the power grid to better withstand fierce storms, prevent cyberattacks, and support more renewables and advanced energy technologies, the company has said. Duke has also pledged to close its remaining coal plants by 2035. 

The North Carolina Legislature also agreed to let the utility request a three-year increase to finance electrical system improvements instead of going through a lengthy approval process each time the company wants to change its power grid.

That new system makes Duke executives and Wall Street happy. The company gets to automatically bill customers for all of its capital investments — plus a nearly 10% profit — giving it incentive to keep building and raising rates. 

Greene — who plans to move in with a friend in Durham and use a federal loan to go to technical school — said the profit margin should be less. And the rate hike — zero. 

“You don’t need it,” she told Floodlight when talking about the rate increase. “You’re not in the negative; you’re nowhere near the negative.”

Massive plan tilts toward high-dollar projects

Duke has a five-year, $65 billion plan across its entire territory, which includes much of North and South Carolina, as well as parts of Florida and the Midwest, to upgrade its power grid. The plan—equivalent to twice the entire annual budget for the state of North Carolina — is to strengthen the system to withstand extreme weather caused by climate change and enable it to support more renewable energy, the utility says. 

The plan includes new capital projects such as battery storage and closing the six remaining coal-fired power plants. The electric company also is eyeing new big-ticket items like offshore wind and next-generation nuclear. 

And despite its own net-zero carbon goals, Duke wants to limit the amount of solar — a cheaper and thus less profitable electricity source — while also planning to build more natural gas plants.

The U.S. government’s fifth National Climate Assessment, released Nov. 14, said residents of the Southeast suffer from lingering heat domes, increased flooding, and poor air quality. A combination of an aging power grid, older housing stock and lax building codes contribute to the high cost of gas and electricity for these residents. 

Spending aimed at ‘stronger, cleaner’ energy

Kendal Bowman, president of Duke Energy’s electric utilities in North Carolina, testified that the company has been making its infrastructure “stronger, smarter, cleaner, more efficient and less reliant on any single fuel source,” which she said will lead to fewer power outages overall.

“Today, the need for consistent, reliable service is not just the expectation of industry and manufacturing but extends into every home and business,” she said in a written testimony. Bowman also appeared before regulators at a May hearing in Raleigh. 

Before the latest rate hike, Duke was earning a mandatory profit margin of 9.6% and had asked regulators to raise that to 10.4%. The North Carolina Utilities Commission approved a 9.8% increase instead. 

In recent years, utilities have rolled out their long-term energy plans, giving their state regulators a road map to how much infrastructure they want to build in the future. 

Some critics say those plans include “gold-plating” — making incremental or questionable upgrades to the power grid to increase profits.

“It is shocking that maintaining or improving the overall reliability of the company’s entire electrical system (in North Carolina) requires nearly a $9 billion capital project spend by the end of (2029),” said Metz, the utilities engineer at the North Carolina Utilities Commission, reacting to Duke Energy’s proposed rate hike in a recent hearing.

Excess profits alleged

A new report from the Pearl Street Station Finance Lab estimates that excessive profits have cost U.S. customers as much as $214 billion over the past 10 years and will cost $34 billion in 2024 alone. It found utilities had a roughly 10% annual return on their capital spending over the past 35 years. 

“Regulated utility companies in the United States have been allowed by their regulators to earn returns higher than the much riskier average S&P 500 company for many years—despite being a protected legal monopoly,” according to the report, which used data from RMI’s Utility Transition Hub. 

RMI, formerly called the Rocky Mountain Institute, reviewed information from electric companies owned by the nation’s top 70 major utilities. The Pearl Street report focused on electric companies that had exceptionally large profit margins in 2020; all five are based in the Southeast, including Duke.

Experts say it’s common to cite outside factors such as high interest rates, inflation, federal energy policy, or pressure from customers for cleaner energy. 

But one advocate says customers have been paying more on their electricity bills because of excess profits over the past three decades—including a spike in the past two years.

“I sense a lot of hand-waving here and not a lot of quantitative analysis,” said Mark LeBel, a senior associate at the Regulatory Assistance Project, a nonprofit that advocates for clean energy policies and rate structures that support them.

Virginia-based Dominion Energy and Duke went to lawmakers in their respective home states to ask that they own future renewable energy projects—a more profitable option than just buying the power from a solar or wind developer. 

Duke would like to tip the scales toward offshore wind and nuclear by asking regulators that the company can cap the amount of solar that it is allowed to add to its power grid each year through 2050. Restricting how much solar Duke can add to its grid means if it does need more carbon-free electricity, the only choices left are the more expensive wind and nuclear projects that come with the 9.8% guaranteed profit. 

The electric companies “have mobilized” to take advantage of the clean energy situation by rolling out these multi-billion dollar grid hardening plans, said Tyler Norris, a Ph.D. student at Duke University’s Nicholas School of the Environment.

Queen Greene recently spoke at a North Carolina Public Utilities Commission hearing in opposition to a proposed monthly rate increase for one of Duke Energy’s electric companies. She is seen here with her 1-year-old son, Giovanni Greene. (Kate Medley / for The Assembly)

Low-income ratepayers hard hit

Those costs and accompanying profits will be passed on to consumers, placing some of the burden of the clean energy transition on those who can least afford it or in some cases, even survive it. 

Carol Carter already pays Duke Energy roughly $200 a month to power her three-bedroom house in Hurdle Mills, North Carolina. During that March hearing, Carter said she was close to retiring, but a rate increase would eat into her household budget. 

“I’m going to be on a fixed income, and a higher rate is not what I need,” she said.

Electricity bills continue to rise across the country, deepening inequality and putting lives at risk. 

The 2018 heat-exposure death of an Arizona woman who had her power shut off because of nonpayment led a state agency to prohibit utility disconnections during the summer months. 

Nineteen states have the same policies prohibiting summer shutoffs, compared with 40 during the wintertime. North and South Carolina, Alabama, and Florida are among those in the Southeast that lack such protections in the summertime, according to the Center for Energy Poverty and Climate

Greene has gotten help from federal and state energy assistance programs. She told regulators during the March hearing that she was considering leaving her home to “no longer deal with Duke.” 

She’s finally been able to lower her monthly bill—mostly by barely using electricity—to $65 or $70. But since the Oct. 1 rate hike, that amount has climbed again closer to $80. Greene says she’s trying to stay positive amid the struggles.

“I’m hardly ever home. I’m driving two hours in the morning, two hours in the evening,” Greene said. “By the time I give my son a bath, take a shower, we’re right back at it the next day.”

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Kristi is a veteran business reporter with years of experience covering the electricity industry. kristi@floodlightnews.org

Kristi E. Swartz/Floodlight