Duke Energy Rates Are Rising, How Does Solar Compare

Duke Energy’s History of Rate Hikes in NC

Duke Energy is a (regulated) monopoly, which means their rate increases are overseen by the North Carolina Utilities Commission (NCUC). When Duke wishes to adjust rates, they file a request with the NCUC that includes a proposed rate change and the supporting evidence for it. This request goes through a review process including public hearings and comments with the NCUC ultimately making a final ruling on the approval of the request. While it’s not the most thrilling read, you can track the current request and all the filings and comments here.

Rate increase requests in NC are not uncommon. Duke regularly files for rate adjustments either based on changes in fuel cost or as part of a “base rate case” which analyzes the company’s total cost changes and adjusts rates accordingly. For simplicity, we’ll focus on Duke Energy Progress’ rate history as an example (Duke Energy Carolinas typically follows a similar pattern).

Duke Energy’s Proposed 2022 NC Rate Increase

In early October, Duke Energy asked the North Carolina Utility Commission (NCUC) to review its rates. This is the first time that Duke Energy has proposed a gradual, multiyear rate increase. Under this request, residential rates are requested to increase by a total of 18.7% by the end of 2025. Here’s a breakdown of residential rate increases by year: 

• 9.9% in year 1 
• 4.5% in year 2 
• 4.3% in year 3

When you layer in these proposed increases with the rate increases already approved, over the next 4 years electricity rates are forecasted to rise by an average of 5.7% annually (versus the 2.8% average annual increase over the past 5 years). 

The graph below shows the impact Duke Energy Progress’s rate increases will have on the average monthly residential electric bill (assuming 1,000 kWh of usage). Existing approved rate increases (shown in blue) are set to go up in 2023 and 2026 (from Rate Case E-2 Sub 1219). You can see the dramatic increase of the currently proposed increases (shown in green) starting in 2023.

What is the timeline for the proposed rate increases? 

Now that Duke has filed a rate case, the NCUC will begin the process of reviewing the request. This process kicks off with the NCUC holding a series of public hearings for customers to comment. After comments are collected, the NCUC conducts a hearing where stakeholders and interest groups, including Duke, will present their viewpoints. Right now, Duke is anticipating a decision by Fall 2023 with hopes of permanent rates going into effect on Oct. 1, 2023. 

What We Think Will Happen

Based on past rate cases, the initially proposed rates are typically modified during the review process. We anticipate that these numbers will change, but it’s hard to tell where they’ll eventually land. 

What will Duke’s rate hike fund? 

For every dollar Duke Energy receives, 35¢ is said to go toward fuel, 40¢ toward operations & maintenance, 16¢ on shareholder earnings, and 9¢ toward taxes and fees. Since its last rate case, Duke has invested $3 billion in generation, transmission, and distribution infrastructure, while reducing its operating costs by $100 million. With those numbers, Duke Energy anticipates 75% of its spending over the next 3 years will be invested in further updates to grid infrastructure.

Duke expects these updates will result in grid infrastructure that is more resilient (more secure, with fewer grid outages, and for shorter periods) and modern (enabling advanced two-way communication for renewables and creating infrastructure for electric vehicles). 

Alongside the rate increase, several new programs are also proposed as part of this package, including a new Customer Assistance Program for those struggling to pay their bills, more energy efficiency programs, and a new time-of-use rate structure.

How is the 2022 rate increase different from past rate hikes? 

This is the first multi-year rate hike requested by Duke in North Carolina. Previously, rate increases were limited to one-year proposals. However, that changes as part of the energy legislation passed in NC House Bill 951 in 2021.

Will Duke increase rates again? 

Will rates continue to rise? [author vigorously shakes 8 ball….] All signs point to yes. In addition to the increases already approved for 2021 and 2022, and the pending 2022 increase request, it is expected that Duke’s rates will continue to rise significantly over the next few years. As Duke works to replace the aging infrastructure of fossil fuel-burning coal and natural gas plants, while at the same time increasing its overall grid capacity, rate increases will be required to pay for these investments. 

How will Duke Energy’s new rates impact the value of solar? 

As utility rates rise, the value of your solar generation also rises! By generating your own energy, you are able to lessen your dependence on the utility, which reduces your exposure to rising electricity costs. In a sense, this means you are locking in the price of your power with the upfront investment of your solar system — which will shield you from rising utility rates for 30+ years!

One of the best ways to compare the value of solar and energy efficiency vs the cost of grid energy is by looking at their Levelized Cost of Energy (LCOE). This calculation looks at total energy generation and divides it by total cost.

For our average solar system in 2022, the levelized cost of solar energy would be between 6 and 7 cents per kWh. To get that number, we take the energy generated by the system over its 30-year lifetime and divide it by its cost minus any incentives like the federal tax credit for solar. This works out to roughly 307,500 kWh generated / $21,000 = 6.8 cents per kWh. 

When we look at that same amount of energy from the utility and assume a moderate 3% annual price increase, it results in an LCOE of 15 to 16 cents per kWh. So the levelized cost of solar is less than half of the levelized cost of grid energy AND it’s also better than current utility rates which are 9 – 11 cents per kWh (sometimes higher for municipal and cooperative utilities).

Whew. That was 2 paragraphs of math. Thanks for sticking with us. Whether you followed all that or not, the simple truth of the matter is the same: utility rates are rising, solar rates never will.

Looking for a new home that will protect you from rising utility rates with energy-efficient construction and solar options? Let us know! Our building science team is happy to connect you with an energy-efficient and sustainable builder.

Where does Duke’s Carbon Plan come in?

Just how big Duke’s future rate increases will be, depends on what type of resources Duke invests in to replace their aging power plants. This issue is being hotly debated in Duke’s proposed Carbon Plan which was submitted to the NCUC in May 2022. Duke’s Carbon Plan is a byproduct of NC House Bill 951 which requires the NCUC to outline a pathway to achieving 70% emissions reductions by 2030 and carbon neutrality by 2050. 

In the currently proposed plan, Duke Energy relies heavily on adding more natural gas and investing in small nuclear reactor technology, in addition to clean energy sources like solar and wind. Duke has submitted 4 different variations of its plan – none of which hit the required 70% reduction target by the 2030 deadline. Duke’s reliance on new and existing natural gas plants, and the glacial pace at which it is retiring its coal-burning plants, earned it an “F” grade and last place rank among major utilities from the Sierra Club in a new report outlining how utilities are tracking towards their climate pledges. The current plan would result in additional annual rate increases of between 1.9% and 2.7%, independent of any other fuel-related cost increases or infrastructure investments.

Duke’s plan is not the only option, however. The North Carolina Sustainable Energy Association (NCSEA) and other groups have provided alternative plans that focus more on modern, clean energy-generating resources like solar and wind. These plans hit the 2030 carbon deadline required by the law AND at a lower cost – which would mean less drastic rate increases for homeowners. 

You can read more about the benefits of including more renewables in the Carbon Plan in this article and on Episode 71 of the Squeaky Clean Podcast by NCSEA.

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