Duke Energy Requests Rate Hike To Boost Service Reliability

Electric services provider, Duke Energy Corporation (NYSE:DUK) , has laid down a request for rate increase with the North Carolina Utilities Commission (NCUC). If the requested new rates are approved by the NCUC, it will come in to effect spring 2018.

Other Details

This recent filing would reflect an overall 2.5% increase annually, as Duke Energy Carolinas' last rate adjustment request in North Carolina was way back in 2013. Once approved by the state regulators, revenues are expected to increase by $647 million, for an overall average rate increase across customer groups by 13.6%. The average rate increase will be 16.7% for residential and 10.9% rate increase for commercial and industrial customers.

Reason for Filing- Duke Energy’s Take

The current rate request filing by the company is in sync with its aim of modernizing power plants, generating cleaner electricity, by responsibly managing coal ash and improving reliability. This, in turn is likely to increase value for customers and shareholders for a smarter energy future.

Energy saving initiatives such as implementation of modern technologies at its facilities to expand scale of operations is likely to bode well, going forward. Notably, the company’s robust five-year capital plan and current plans of investing about $37 billion in growth projects over the 2017-2021 time frame support this notion.

Our View

The solar energy market in the United States has evolved massively in the past few years. In fact, Duke Energy Carolinas has retired half of its older, less-efficient coal plants which lack state-of-the-art emission controls and had them replaced with cleaner, natural gas-fueled plants. The utility has also supported the sustainable growth of solar energy, helping move North Carolina to second in the nation for overall solar power.

We appreciate the company’s efforts of expanding its scale of operations, pursuing additional generation projects and introducing newer renewable projects to meet growing demands for renewable energy in the dynamic environment.

Another company that is currently diversifying its generation portfolio with emphasis on renewable sources is Xcel Energy Inc. (NYSE:XEL) . This utility is currently planning to invest about $4.2 billion in renewables over the next five years. The company expects to bring 3,400 megawatts of renewable generation online by 2020.

Price Movement

Duke Energy has outperformed industry in the last 12 months. The company’s shares gained 13.2% compared with the industry’s increase of 11.2%.

Duke Energy’s focus on core domestic regulated assets and highly-contracted renewable business are going to drive performance over the long term.

Zacks Rank

Duke Energy currently carries a Zacks Rank #2 (Buy). Investors can consider other top-ranked stocks like Pattern Energy Group Inc. (NASDAQ:PEGI) and Ameren Corporation (NYSE:AEE) from the same industry. These two stocks carry the same Zacks Rank as Duke Energy. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pattern Energy posted an average surprise of 59.21% in the trailing last four quarters. The company’s 2017 estimates increased significantly form a loss of 10 cents to earnings of 27 cents in the last 90 days.

Ameren posted an average surprise of 2.83% in the trailing last four quarters. The company’s 2017 estimates increased by 3 cents to $2.80 in the last 90 days.

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