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Duke Energy Arm Files for Storm Recovery Expenses in Florida

Zacks Equity Research
Updated

Duke Energy Corporation DUK announced that its subsidiary, Duke Energy Florida, has filed an application with the Florida Public Service Commission (“FPSC”) to recoup the expenses incurred by it to restore normalcy of utility services in the state post Hurricane Irma.

Hurricane Irma hit Florida on Sep 11, with wind speed of more than 100 miles and knocked out power of 64% or 6.7 million electricity customers in the state, per a date provided by the U.S. Energy Information Administration.  Thanks to the continuous hard work of the line and field workers, Duke Energy could restore power to nearly 99% of users in Florida.

The company will ask for a restoration cost recovery of $381 million and an additional $132 million to replenish its storm reserve account.

Increase in Monthly Bill

If approved by the FPSC, the monthly bill of a residential customer consuming 1,000 kWh of electricity will increase $5.20 per month for the expected recovery period of three years. The utility bills of commercial and industrial customers are expected to rise in the range of 2.5% to 6.6%, subject to certain conditions.

The storm restoration charge is expected to begin from March 2018 as the commission is expected to provide its decision on the same within next 60 days.

Investments Help in Restoration

Duke Energy has invested more than $5 billion in Florida since 2004 to strengthen its power delivery system in the Southeast.  These investments helped the company in strengthening its distribution lines, vegetation management and automation of the grid.

Another utility, NextEra Energy Inc. NEE through its subsidiary Florida Power & Light Company (“FPL”) invested nearly $3 billion to strengthen its electricity transmission and distribution capabilities in the state since 2006. FPL already filed with the FPSC to recoup its $1.3 billion expenses in restoration work.

All investments made by these companies gave them an opportunity to provide initial resistance against the destruction of Irma. However, the companies had to incur an additional expenditure to restore operation.

We expect the recovery of the storm related expenditure to help the utility continue with further investment to strengthen the existing infrastructure and focus more on renewable source to produce electricity.

Price Movement

Duke Energy has returned 8.2% in the last 12 months, outperforming Zacks Electric Power industry’s rally of 6.6%.



The company’s focus on core domestic regulated and highly-contracted renewable business, its stable financial position and streamlining of portfolio will help it deliver a strong performance.

Zacks Rank & Key Picks

Duke Energy currently has a Zacks Rank #3 (Hold). A couple better-ranked stocks in the same industry include PPL Corporation PPL and DTE Energy Company DTE, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PPL Corporation pulled off an average positive earnings surprise of 6.26% in the last four quarters. Its 2017 and 2018 Zacks Consensus Estimate moved up 1.4% and 0.4%, respectively, in last 90 days.

DTE Energy reported average positive earnings surprise of 3.81% in the last four quarters. Its 2017 and 2018 Zacks Consensus Estimate moved up 2.2% and 0.9%, respectively, in last 90 days.

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NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
 
Duke Energy Corporation (DUK) : Free Stock Analysis Report
 
DTE Energy Company (DTE) : Free Stock Analysis Report
 
PPL Corporation (PPL) : Free Stock Analysis Report
 
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Zacks Investment Research