Profit Or Not: What's In It For Duke Energy?

10:24 PM, Oct 12, 2011   |    comments
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Greensboro, NC -- Duke Energy wants permission from the state to raise your taxes by about 18 percent, and this is their estimate of how much it will make them: $646 million.

From there, it gets confusing. Duke Energy says the new rate will generate zero-profit, but they're still expecting a portion to go to investors.

Our Frank Mickens had a conversation with Duke Energy spokesperson, Jason Wall, about the rate hike and what it really means.

Wall says having the opportunity to earn a reasonable return for their investors is a good thing for their customers.

Will people find that hard to believe?

Wall adds, "Having a financially strong utility and having a company investors want to invest in, helps to lower the overall price tag of the investments and the price tags of the projects we're building...and ultimately lowers the overall cost consumers will pay for those projects once they're built."

Wall said it's impossible to estimate how much new revenue could go to investors, but he would not call it a "profit."

What he did say, is the rate increase will make up for $4.1 billion already spent on various plant upgrades and other expenses. They're also asking to raise the limit on how much they can make for stockholders. The current limit is 10.7%. They want to make it 11.5%.

Profit or no profit, now matter what you call it, we asked for an economist's help.

We spoke with Senior Research Fellow Andrew Brod with UNCG's Bryan School of Business and Economics.

We asked Brod, "Do companies think about customers at all when they jack up rates like this?"

Brod replied, "Every business sets its prices with the customer in mind. That doesn't mean they're necessarily compassionate about the customer, but they always have the customer in mind."

He adds, "Every time a business decides on a price, it's trying to figure out - what's the most I can get? How many people will turn this away? What's the down-side? What's the cost?"

It's very important to remember, Duke Energy did not have a rate increase at all between 1991 and 2007.

And remember this: Duke Energy is buying Progress Energy. So Progress customers, you will also have to pay more.

 

 

 

 

 

 

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