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Duke Energy (DUK) Arm Gets NCUC Approval to Slash Electric Rates

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Zacks Equity Research
·3 min read
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Duke Energy Corp.’s DUK subsidiary — Duke Energy Progress — recently announced that its customers in North Carolina will save more than $4 on their monthly energy bills, beginning December, primarily led by the combined impact of annual rate adjustments. The rates are also likely to get adjusted in January to incorporate costs associated with the implementation of energy efficienct and demand-side management programs.

A Brief Look at the Rate Reduction

Duke Energy has also announced new lower electric rates for North Carolina customers. The primary reason behind the lowered rates, approved by the North Carolina Utilities Commission (NCUC), is the annual adjustments for costs related to fuel used to generate electricity at power plants.

Consequently, effective December, the energy costs in North Carolina will decrease 3.9% for residential customers, 3.6% for commercial customers and 2.3% for industrial customers.

North Carolina Customers to Benefit From Rate Reduction

Utility companies are mostly regulated and require systematic investments for their infrastructural investments. Maintained and upgraded infrastructure enables these companies to provide reliable services to their customer bases. The utilities recoup the invested amount through rate revisions approved by the commissions. Moreover, usage of cheaper fuel and the introduction of new technology in generation and distribution systems enable the utilities to reduce rates.

Courtesy of the rate revision, a typical residential customer in North Carolina who consumes 1,000 kilowatt-hours of electricity will receive a reduction of $4.59 per monthly bill, reflecting a fall in prices from $116.87 to $112.28.

Other Utilities Following Suit

We have been witnessing a trend among major utilities reducing their rates in the recent past. Alongside Duke Energy North Carolina, subsidiaries of other major utility companies, such as NextEra Energy’s NEE Florida Power & Light Company (FPL) and Ameren Corporation's AEE subsidiary, Ameren Missouri, had earlier announced their plans of reducing electric rates for residential, commercial and industrial customers in 2021.

In March 2020, NextEra Energy’s FPL unit sought approval from the Florida Public Service Commission to lower electricity rates from May 1. FPL’s plan was to make a one-time decrease of around 25% for the typical residential customer bill (using 1,000-kWh on average).

In the same month, Ameren Missouri also announced that the Missouri Public Service Commission has given a green light to the new lower electric rates for residential, commercial and industrial customers, effective April. This approval has reduced monthly bills for the typical residential customer by $1.25 per month.

Price Movement

Shares of the company have inched up 3.8% in the past year aganst the industry’s decline of 6.8%.

Zacks Rank

Duke Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock from the same industry is Portland General Electric Company POR, carrying a Zacks Rank #2 (Buy).

Long-term earnings growth of Portland General Electric is pegged at 5.5%. It delivered an average positive earnings surprise of 98.07% in the last four quarters.

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Ameren Corporation (AEE) : Free Stock Analysis Report
 
Portland General Electric Company (POR) : Free Stock Analysis Report
 
Duke Energy Corporation (DUK) : Free Stock Analysis Report
 
NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
 
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