Duke Energy's Arm Gets NCUC Nod For Natural Gas Rate Reform
Zacks Investment Research | May 30, 2018 10:03PM ET
Duke Energy Corp.’s (NYSE:DUK) subsidiary, Piedmont Natural Gas, recently announced that it has received the regulatory nod for altering its natural gas rates from the North Carolina Utilities Commission (NCUC). As a result, the average residential customer of Duke Energy in North Carolina will witness a $1 decline in their monthly bill. The changes will be effective from Jun 1, 2018.
Details of the Rate Change
In May 2018, Piedmont Natural Gas proposed to change two separate components of its natural gas billing rate — the Integrity Management Rider (IMR) and the benchmark commodity cost. The proposal was submitted to the NCUC.
Notably, the IMR rate change proposal offered a decrease of $0.44 per dekatherm for residential customers and $0.26 per dekatherm for small and medium general-service customers. On the flip side, an increase from $2.50 per dekatherm to $2.75 per dekatherm was proposed for the benchmark commodity cost of natural gas.
Cumulatively, these rate changes will reduce a North Carolinian residential customer’s billing rate by $0.19 per dekatherm. In fact, this new rate change marked the fourth decrease in natural gas rates for the company’s North Carolina customers in 2018.
Per management, including the latest rate reform, the company’s average residential customer's monthly bill has decreased by approximately $6.
Rationale Behind the Rate Reform
Rate reduction is nothing new in the Utility space. In the United States, government regulations dominate the Utility sector. Therefore, the utility providers frequently file for rate changes with the states’ utility commission to keep their revenue requirement competitive, in tandem with changing market conditions.
We believe, this time the latest tax reform has triggered this rate reduction. Of late, we have witnessed that the latest tax reduction resulted in lower accrued tax expenses for the utilities and various companies are passing on this benefit to the customers by reducing utility rates and bills. In this regard, Duke Energy is no exception. The company has also followed the same path and have reduced its electricity as well as natural gas rates, which in turn, has allowed it to reward the customers with tax savings.
In fact, this latest rate reduction is in line with the company’s earlier-made recommendation. On fourth-quarter 2017 earnings call, Duke Energy stated that the lower tax rates should be applied to reduce utility rates for the customers in the near term and aid in offsetting rate increases in the future.
In recent times, we have witnessed some other utilities directing the federal tax savings to reduce bills for the customers. Notably, utility providers including the likes of NextEra Energy (NYSE:NEE) , AVANGRID (NYSE:AGR) and WGL Holdings (NYSE:WGL) , have expressed intention to pass on tax savings benefits to customers.
Price Movement
In a year’s time, Duke Energy has lost 10.1% compared with the broader Original post
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