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Duke Energy (DUK) Unit Files for Rate Hike to Strengthen Grid

To further strengthen the electric grid, Duke Energy’s DUK unit Duke Energy Progress filed for a rate increase with the North Carolina Utilities Commission (“NCUC”). The rate, if approved by the commission, will allow the company to generate funds required for an upgrade of the electric grid, which will lower the duration of outages and create resistance against extreme weather.

 

Investments made by Duke Energy Progress in the past five years have helped to save more than 3 million hours of total lost outage time for customers. This is the first-rate appeal from the Duke Energy unit since 2019 and the proposed rate hike, if approved by NCUC, will be implemented in the next three years. The net increase in retail revenues in year one is about $326 million or 8.5%, followed by $151 million (3.9%) in year two and $138 million (3.6%) in year three – a total 16% increase by late 2025.

 

Rate hikes impact the monthly expenses of customers, but a reasonable rate increase is the only way to allow utility operators to recover the expenses made to strengthen their infrastructure for providing reliable services to customers. The new Customer Assistance Program proposed by the Duke Energy unit, as part of the rate case, can assist customers in financial distress.

Utilities Invest in Infrastructure

The domestic-focused regulated utilities continue to make investments in their infrastructure to ensure reliable supply and more energy generation from clean power sources. Duke Energy, by investing heavily in infrastructure and expansion projects, remains focused on expanding its scale of operations and implementing modern technologies at its facilities. DUK anticipates spending capital worth more than $130 billion over the next decade, with $63 billion during the 2022-2026 period. The long-term (three to five year) earnings growth of Duke Energy is currently pegged at 5.97%.

 

Utilities in the same industry with well-chalked-out investment plans for strengthening their services are NextEra Energy NEE, American Electric Power Company, Inc. AEP and Exelon Corporation EXC.

 

NextEra Energy aims to invest $85-$95 billion from 2022 through 2025 to strengthen its infrastructure. Courtesy of persistent renewable asset additions to its generation portfolio and execution across all business segments, NextEra Energy expects to witness a CAGR of more than 10% for earnings per share through 2025 from the 2021 adjusted EPS of $2.55. The long-term earnings growth of NextEra Energy is currently pegged at 9.66%. NextEra Energy currently has a Zacks Rank #2 (Buy).

 

American Electric Power aims to invest approximately $24.8 billion in its transmission and distribution business during the 2022-2026 period to construct a more efficient grid and deliver custom energy solutions to customers. Such investments should enable AEP to make infrastructural upgrades in its transmission and distribution of utility services to resist adverse climate conditions and offer better facilities. Its long-term earnings growth is currently pegged at 6.11%. American Electric Power currently has a Zacks Rank #3 (Hold).

 

Exelon plans to invest nearly $29 billion during the 2022-2025 forecast period in regulated utility operations for grid modernization and to increase the resilience of its infrastructure to benefit customers. Such systematic investment is going to boost the long-term earnings of the company. The current dividend yield of the company is 3.4% and its long-term earnings growth is pegged at 7.11%. Exelon currently has a Zacks Rank #3.

Price Performance and Zacks Rank

Duke Energy has lost 21.3% compared with Zacks Utility - Electric Power industry decline of 18.2% in the past six months.

Zacks Investment Research
Zacks Investment Research

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Duke Energy currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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