(DUK) Duke Energy Eyes Compromise

Duke Energy Carolinas, a subsidiary of Duke Energy Corporation (DUK), reached a compromise solution with the Office of Regulatory Staff (ORS); the Commission of Public Works for the city of Spartanburg, South Carolina; and the Spartanburg Sanitary Sewer District; with respect to the utility’s request to raise base rates in South Carolina.

On conciliatory terms, Duke Energy will slash its proposed 15% base rate increase for South Carolina to 6%. Added to it Duke Energy will also contribute $4 million to a limited liability company, AdvanceSC, to improve its South Carolina service area in terms of economic development, low income assistance, education initiatives, and existing manufacturing support.

However, the compromised agreement is pending approval from the Public Service Commission of South Carolina (PSCSC). If approved, the average rate increase would be 5.98%. If cleared by the PSCSC, new rates would go into effect in February 2012.  The agreement will be considered by the PSCSC during a scheduled hearing on December 7, 2011.

If the commission approves the deal, residential customers will see their rates rise about 7.1%, adding about $6.25 to the average monthly bill. Commercial customers will witness a 5.2% increase. Industrial customers will see a 5.1% hike.

Duke Energy Carolinas owns nuclear, coal-fired, natural gas and hydroelectric generation. That diverse fuel mix provides approximately 19,000 megawatts of electricity to approximately 2.4 million customers in a 24,000-square-mile service area of South Carolina and North Carolina.

Charlotte, North Carolina-based Duke Energy is a diversified energy company with a portfolio of domestic and international, natural gas and electric, regulated and unregulated businesses which supply, deliver, and process energy for customers in North America and selected international markets.

Duke Energy focuses on core utility operations to build its rate base through capital expenditure investments. Looking forward, our favorable opinion also stems from the ongoing merger deal with Progress Energy Inc. (PGN). The merger is expected to be completed by the end of fiscal 2011. The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.

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PROGRESS ENERGY (PGN): Free Stock Analysis Report

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