Economics Research Integrated Research ECONOMIC RESEARCH The Economic Research Division is responsible for performing financial and quantitative analyses on behalf of the Public Staff. With respect to financial analyses, the Economic Research Division works with the Accounting Division of the Public Staff to provide technical evaluations and recommendations to the North Carolina Utilities Commission (Commission) on the opportunity cost of capital. The opportunity cost of capital includes: the cost rate of debt, the cost rate of equity, and the appropriate capital structure in setting the revenue requirement that underlies the rates ultimately charged to customers. Other financial analysis areas include: evaluating the financial cost and benefits of natural gas hedging, assessing the financial viability of conventional merchant power generators, assessing the financial viability of renewable merchant power generators, assessing the financial viability of water and wastewater utilities, and adjusting energy sales for abnormal weather. With respect to quantitative analyses, the Economic Research Division works with the Energy Division of the Public Staff to provide technical evaluations and recommendations to the Commission involving: electric utility integrated resource plans, avoided cost rates for non-utility generation and demand-side management and energy efficiency riders, and certificate proceedings for new generation. Additionally, the Division works on economic issues relating to fuel adjustment riders, Renewable Energy Portfolio Standard riders, and Competitive Procurement of Renewable Energy riders. The Economic Research Division can be reached at 919-733-1521 or email@example.com. Integrated Resource Plans The Economic Research Division and the Energy Division work in tandem to review electric utility integrated resource plans (IRP) and the corresponding source documentation provided by utilities. The Economic Research Division is the primary lead for the following utility IRP topics: evaluation and development of the IRP, peak demand and energy sales, price forecast for fuel and commodity prices, capacity markets, and quantitative and qualitative analyses. The Energy Division is the primary lead for the following utility IRP topics: coal retirements, distribution, demand-side management and energy efficiency, first resource need, grid requirements/modernization, integrated system & operations planning (ISOP), nuclear license renewal, renewable energy strategy/forecast, resource adequacy, screening of generation alternatives, solar and storage assumptions, transmission (planned or under construction), utility owned generation, utility short-term action plan, and voltage optimization. IRP Proceedings Year(s) Docket Number 2009 E-100 Sub 124 2010 & 2011 Update E-100 Sub 128 2012 & 2013 Update E-100 Sub 137 2014 & 2015 Update E-100 Sub 141 2016 & 2017 Update E-100 Sub 147 2018 & 2019 Update E-100 Sub 157 2020 & 2021 Update E-100 Sub 165 Note: Table includes all IRP proceedings and is updated annually. Avoided Costs Rates Under Section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA), electric utilities are required to offer to purchase available electric energy from cogeneration and small power production facilities that obtain “qualifying facility” (QF) status. The Federal Energy Regulatory Commission regulations require that the rates electric utilities pay to purchase electric energy and capacity from QFs reflect the cost that the purchasing utility can avoid as a result of obtaining energy and capacity from these sources. G.S. § 62-156 requires the North Carolina Utilities Commission to biennially determine the rates to be paid by electric utilities for power purchases from small power producers according to certain standards prescribed therein. The approved avoided cost rates are also applied in fuel adjustment riders, Renewable Energy and Energy Efficiency Portfolio Standard riders, demand-side management and energy efficiency riders, Competitive Procurement of Renewable Energy riders, and the approved cost structure underlying the negotiated rates paid to larger QF generators who are not eligible for the standard tariff. Avoided Cost Proceedings Year Docket Number 2010 E-100 Sub 127 2012 E-100 Sub 136 2014 E-100 Sub 140 2016 E-100 Sub 148 2018 E-100 Sub 158 2020 E-100 Sub 167 Note: Table includes all Avoided Cost proceedings and is updated biannually. Note: Avoided cost rates include both avoided energy and capacity costs. Approved & Earned Rate of Return Approved Rate of Return The Economic Research Division testifies before the North Carolina Utilities Commission (Commission) on the appropriate rate of return on rate base for electric, natural gas, and water utilities. The overall rate of return is comprised of long-term debt, short-term debt (natural gas distribution utilities), and common equity capital and the corresponding cost rates for debt and equity capital. The combination of the approved capital structure ratio and the appropriate cost rates of long-term and common equity generates the overall rate of return. The Commission’s approved rate of return does not guarantee a utility will earn such returns; rather, the approved rate of return allows for the opportunity to produce a fair return for its shareholders, maintain its facilities and service, and compete in the marketplace for capital. Date of Order Docket Number Approved Rate of Return (%) Approved Return on Equity (%) DEC 06/22/2018 E-7 Sub 1146 - 9.90% DEP 2/23/2018 E-2 Sub 1142 7.09% 9.90% DENC 2/24/2020 E-22 Sub 562 7.20% 9.75% PNG 10/31/2019 G-9 Sub 743 7.14% 9.70% PSNC 10/28/2016 G-5 Sub 565 7.53% 9.70% CWS 3/31/2020 W-354 Sub 364 7.39% 9.50% Aqua 10/26/2020 W-218 Sub 526 6.81% 9.40% Notes: Table only includes the most recent proceeding. Earned Rate of Return After the North Carolina Utilities Commission (Commission) has approved an overall rate of return, which includes the approved return on common equity, a utility has the opportunity to generate such earnings. The earned rate of return on the common shareholders' investment is a meaningful measure of the profitability of any utility, and consequently the reasonableness of the utility’s overall rates and charges. The ratio, the earned rate of return to the approved rate of return, traditionally represents profitability after all revenues and costs have been taken into consideration. On January 30, 2020, the Commission issued its Order Requiring Electronic Filing of Quarterly Financial and Operational Data (Docket No. M-100, Sub 157) directed the major electric, natural gas, and telephone utilities under its jurisdiction to begin electronically filing their Quarterly Financial and Operational Data. E.S.-1 or G.S.-1 forms, commonly referred to as ‘electric and gas surveillance reports,’ are prescribed by the Commission and have been used to report selected financial and operational information and data by utilities since 1972. The filed reports for these companies can be found with the following links: Utility Link Duke Energy Carolinas, LLC Docket: M-1 Sub 12DEC Duke Energy Progress, LLC Docket: M-1 Sub 12DEP Dominion Energy NC Docket: M-1 Sub 12DENC Public Service of North Carolina, Inc. Docket: M-1 Sub 12PSNC Piedmont Natural Gas Company, Inc. Docket: M-1 Sub 12PNG Frontier Natural Gas Company Docket: M-1 Sub 12FNG Past Commission Quarterly Review reports can be found in Docket M-1 Sub 12.