Duke Energy (DUK) Plans to Hike North Carolina's Energy Bills

Duke Energy Corp’s DUK subsidiary, Duke Energy Carolinas, recently unveiled its plans to increase rates for its North Carolina customers due to the rising fuel cost. The new rates will only be applicable if approved by the North Carolina Utilities Commission.

On approval, the new rates will increase bills for Duke Energy Carolinas’ residential customers by 7.9%, beginning from Sep 1, 2022. However, from Jan 1, 2023, the rate increase would be 6.6% for residential customers, 9.3% for commercial customers and 9.0% for industrial customers.

Moreover, the aforementioned rate increases, if approved, will effectively result in a residential customer of Duke Energy Carolinas, using 1,000 kilowatt-hours (kWh), to witness an increase of up to $6.94 in the monthly bill from $105.34 to $112.28.

Rationale for Rate Increase

The main rationale, which triggered the rate increase request by Duke Energy Carolinas, was to adjust for the higher fuel and commodity prices, from which the company suffered in 2021. The rise in energy prices was primarily due to the economic recovery witnessed after the pandemic-led market turmoil. The low supply in comparison to demand also fueled the prices of the commodity.

In this context, through this rate increase, Duke Energy intends to recover nearly $245 million as part of its annual adjustment of the actual cost of the fuel used to power North Carolina homes and businesses.

Growth Prospects

Duke Energy’s long-standing plans include the expansion of its scale of operations and the implementation ofmodern technologies at the utility’s facilities by investing heavily in infrastructure and expansion projects.

To this end, it is worth mentioning that DUK currently intends to invest $130 billion in its overall growth projects over the next 10 years. Such investments are anticipatedto boost Duke Energy’s utilization ofnew technology in generation and distribution systems, thereby enabling the utility to further reduce rates for its customers. The rate increases would also help the company achieve its goals in expansion projects.

Peer Moves

Alongside Duke Energy, major utility companies, such as NextEra Energy NEE and PPL Corporation PPL and Ameren Corporation AEE, announced their plans to increase electric rates for residential, commercial and industrial customers in 2022.

For instance, in August 2021, NextEra Energy’s subsidiary, Florida Power & Light Company (“FPL”), in collaboration with other customer groups, filed a request to increase energy rates by $3 billion over the next four years. The proposal primarily reflects FPL’s efforts to recoup investments in the escalating natural gas burning capacity at its various plants.

NextEra Energy boasts a long-term earnings growth rate of 8.8%. The Zacks Consensus Estimate for NEE’s 2022 earnings is pegged at $2.77 per share, suggesting a growth rate of 8.6% from the prior-year period. NextEra Energy’s shares have returned 10.5% in the past year.

In December 2021, PPL Corporation increased its residential electricity supply rate from 7.544 per kWh to 9.502 per kWh due to higher natural gas prices.

The Zacks Consensus Estimate for PPL Corporation’s 2022 earnings implies a growth rate of 40% from the prior-year period. The Zacks Consensus Estimate for PPL’s 2022 sales implies a growth rate of 10.3% from the prior-year period.

In March 2021, Ameren’s subsidiary in Missouri filed a request with the Missouri Public Service Commission to adjust its electric and natural gas base rates for 2022.  If approved, natural gas rates would increase by approximately $4 a month for an average residential customer.

Ameren boasts a long-term earnings growth rate of 7.5%. The Zacks Consensus Estimate for AEE’s 2022 earnings is pegged at $4.03 per share, suggesting a growth rate of 4.9% from the prior-year period. Ameren’s shares have returned 19.8% in the past year.

Price Movement

In the year-to-date period, Duke Energy’s shares have rallied 18.7% compared with the industry’s growthof 10.6%.

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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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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