Duke Energy Ohio, a unit of Duke Energy
Corporation ( DUK ), has entered an
agreement with the Staff of the Public Utilities Commission of Ohio
(:PUCO) over its Jun 2012 request to hike its rates.
Under the latest agreement, the annual increment in revenue for
the Cincinnati-based utility is expected to be $49 million for an
average 2.9% increase in electric bills. This is equivalent to a
monthly hike of $3.72 for a normal Ohio residential electric
customer. After the necessary permit, the electric rate increases
would take effect mid-year. The recourse to rate hike applications
is a usual practice by energy companies to recover the huge capital
investments they make.
However, the settlement leaves gas rate increases unresolved due
to the lawsuits over environmental remediation costs related to
Duke Energy's former manufactured gas plant locations.
The terms of the settlement also comprise return on equity (ROE)
of 9.84% for both the electric and natural gas distribution cases.
Again, it includes a capital structure of 53.3% equity and 46.7%
debt. This is in line with the company's present capital structure.
Duke Energy Ohio has also decided to set aside about $700,000
annually for low income weatherization and fuel fund.
This rate hike, if approved, will eventually aid the company to
recover its investments. Over the last couple of years, Duke Energy
has exhausted a substantial amount to improve the natural gas
delivery system. This is essential for improving efficiency,
cutting fuel consumption and, thereby, lowering the cost of
Recently, another affiliate of Duke Energy Corporation − Duke
Energy Carolinas − requested the South Carolina Utilities
Commission (:PSCSC) to make a 15.1% rate increase. If approved, the
rate increase is expected to generate $220 million more from the
We view Duke Energy − the largest electric power holding company
in the U.S. − as a well-managed and high-quality energy provider in
high-growth areas. However, the present unfavorable macro backdrop,
predominantly fossil-fuel based generation assets, tepid demand for
electricity, and pending regulatory cases keep us on the
Duke Energy presently carries a Zacks Rank #3 (Hold). Better
performing stocks in the same sector include Brookfield
Infrastructure Partners L.P. ( BIP ), Edison
International ( EIX ) and
Empresa Nacional de Electricidad S.A . ( EOC ). Brookfield
Infrastructure and Empresa carry a Zacks Rank #1 (Strong Buy) and
Edison holds a Zacks Rank #2 (Buy).
(We are reissuing this article to correct a mistake. The
original article, issued earlier this week, should no longer be
relied upon.)BROOKFIELD INFR (BIP): Free Stock Analysis
ReportDUKE ENERGY CP (DUK): Free Stock Analysis
ReportEDISON INTL (EIX): Free Stock Analysis ReportENDESA-CHILE (EOC): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment