367 N.C. 444
N.C.2014Background
- Duke Energy Progress (DEP) sought a rate increase in Oct 2012 to raise $359M (11% of base revenues); requested ROE of 11.25%. The NC Utilities Commission suspended rates, held public and evidentiary hearings, and received testimony from 127 public witnesses and multiple expert witnesses.
- DEP and the Public Staff filed a settlement (Stipulation) in Feb 2013 providing a net revenue increase of $178,712,000 and an agreed ROE of 10.2%; the Attorney General and others opposed the Stipulation.
- Experts: DEP’s Robert Hevert recommended an ROE of 11.25% and testified North Carolina’s economic conditions were substantially similar to the U.S. Public Staff economist Ben Johnson supported a 10.2% ROE as reasonable given slow economic recovery. Other intervenors urged lower ROEs.
- The Commission approved the Stipulation and set ROE at 10.2%, expressly considering customer testimony on affordability, findings about unemployment and economic stress, and Stipulation provisions (e.g., $20M for low-income assistance; exclusion of certain construction work in progress; adjusted capital structure).
- The Attorney General appealed, arguing the Commission failed to make sufficient findings showing it considered changing economic conditions’ impact on customers and that it should have quantified any ROE adjustment for consumer interests.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Commission’s order contains sufficient findings that it considered the impact of changing economic conditions on customers when setting ROE | The Commission failed to make detailed findings showing it meaningfully considered consumer effects and should have quantified any adjustment | The Commission made sufficient findings showing it considered economic conditions and need not quantify the influence on ROE | Affirmed: findings were sufficient and supported by substantial evidence |
| Whether the 10.2% ROE is supported by competent, material, and substantial evidence in view of the entire record | The record did not support the ROE; Commission failed to show how consumer interests altered ROE | Expert testimony, public testimony, and Stipulation provisions supported the ROE as balancing investor and consumer interests | Affirmed: ROE supported by competent, material, substantial evidence |
| Whether statutory standards (N.C.G.S. § 62-79 and § 62-94) required more specific factual findings | The statutes require findings in "meaningful detail" and quantification of adjustments for consumer impact | Statutory requirements satisfied by findings describing economic conditions, customer testimony, and how Stipulation terms mitigated impact | Held: statutory findings requirement met; lack of numeric quantification not fatal |
| Whether the Commission must "quantify" the extent consumer interests influenced the final ROE | The Commission must quantify how much consumer conditions reduced the ROE | Quantification is not required; subjective balancing may rely on qualitative findings and evidence | Held: no quantification requirement; qualitative findings suffice when supported by evidence |
Key Cases Cited
- State ex rel. Utilities Comm’n v. Cooper, 758 S.E.2d 635 (N.C. 2014) (discusses effect of ROE on shareholders and customers and role of ROE in rate setting)
- State ex rel. Utilities Comm’n v. Cooper, 739 S.E.2d 541 (N.C. 2013) (Commission must make findings on impact of changing economic conditions on customers when setting ROE)
- State ex rel. Utilities Comm’n v. Carolina Util. Customers Ass’n, 500 S.E.2d 693 (N.C. 1998) (procedural and findings standards for Commission orders on appeal)
- State ex rel. Utilities Comm’n v. Public Staff, 374 S.E.2d 361 (N.C. 1988) (recognizes inherent subjectivity in setting ROE and limits on required specificity)