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Duke Energy sees clearer growth, policy picture in 2021 from SNL Electric Utility Report Duke Energy sees clearer growth, policy picture in 2021Byline: Darren Sweeney Duke Energy Corp. management expects to resolve several key headwinds in the coming months even as the company continues to feel the financial impacts of the COVID-19 pandemic. "As I look at 2021, there is so much clarity," Duke Energy Chair, President and CEO Lynn Good said Nov. 5 on the company's third-quarter 2020 earnings call. "We will have all of this behind us, the uncertainties that have been a challenge for us." While anticipating a 13-cents-per-share earnings hit from canceling the Atlantic Coast Pipeline LLC project in the second half of 2020, on top of COVID-19 and unfavorable weather-related impacts, Duke Energy does see the resolution of key rate case activity and potential favorable policy changes in the near term. "We've got a clean picture for 2021," Good said. In addition, Duke Energy subsidiaries Duke Energy Carolinas LLC and Duke Energy Progress LLC have appeals before the South Carolina Supreme Court in their respective electric rate cases, challenging lower coal ash cost recovery and a reduced return on equity. "[W]e're excited about the ability for the utilities to demonstrate the growth we know they're capable of without [Atlantic Coast Pipeline], without rate case overhang, without coal ash, et cetera. And so, we believe there is incredible opportunity in 2021 and then growth beyond," Good said. Duke Energy Executive Vice President and CFO Steven Young noted the company is "seeing the highest customer growth we've seen in several years in the Carolinas and Florida." "So, perhaps that can give us a pickup as well," Young said. Duke Energy also sees investment potential and possibly regulatory reform taking shape in North Carolina as part of the state's Clean Energy Plan, which calls for up to a 70% reduction in greenhouse gas emissions from its operations there by 2030 from 2005 levels. "I think at the top level, the regulatory reform is really focused on how can we incent the development of this critical infrastructure and the associated reduction in carbon," Good said. "So, things like multiyear rate plans are being discussed. Decoupling is being discussed. And we believe there's a lot of interest in those types of tools in order to move this forward. Performance-based rate-making would be another thing that I would point to because you can tie achievement of certain outcomes to performance-based rate-making." To reflect near-term investment potential, Duke Energy recently increased its five-year capital plan to $58 billion from $56 billion for 2020 through 2024. The company also provided some visibility into its next five-year capital plan, which it expects to be in the range of $65 billion to $75 billion for 2025 through 2029. "We now expect a 6.5% rate base [compound annual growth rate] through 2024 and growing to a 7% rate base CAGR by the end of the five-year planning period," Good said. Retail sales Duke Energy management said the company is seeing less of an impact on retail sales than anticipated tied to the coronavirus pandemic. Duke Energy's third-quarter 2020 retail electric volumes were down 2% compared to the year-ago period, but the company had expected a 3.5% decline in overall electricity sales. "Despite the continuing effects of COVID-19, the economies in our jurisdictions have shown a level of resiliency with approximately 85% of our largest commercial and industrial customers resuming operations by September," Young said on the call. "While the pandemic's effect on the economy still bears close monitoring, we are updating our full-year COVID load forecast to a decline of approximately 2[%] to 3% in total retail volumes compared to our previous estimates of a 3[%] to 5% decline [in electricity sales]." "This revised load forecast equates to approximately 20 to 25 cents of earnings per share impact and when coupled with waived fees and non-deferred COVID costs, results in COVID-related headwinds of 25 to 35 cents in 2020," the CFO added. Duke Energy has achieved about $350 million, or 75%, of its targeted cost savings to date to offset revenue declines tied to the pandemic. |
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