Duke Energy’s (DUK - Free Report) subsidiary, Duke Energy Florida, requested Florida Public Service Commission to increase electricity rates for residential, commercial and industrial customers. If approved, residential customers will have to pay an additional $5.34 per month for using 1,000 kilowatt hour (kWh) electricity. Similarly, commercial and industrial customers’ bills will likely increase 2.6-7.7%.
Reason Behind Rate Hike
The rate hike is expected to assist the regulated company to cover costs incurred for restoration work, following the Category 5 storm, Hurricane Dorian, and a smaller Tropical Storm, Nestor that occurred in October. Notably, Nestor was a string of tornadoes, with a speed of 120 miles per hour, which uprooted trees, overturned vehicles and ripped off roofs.
The estimated restoration costs for Hurricane Dorian are $171 million and that for Nestor is $400,000.
Duke Energy is focused on improving existing infrastructure and enhancing grid reliability. With an aim to make its assets stronger to reduce outages due to natural calamities, it is willing to invest $28.5 billion for electric utilities and infrastructure, $5.9 billion for gas utilities and infrastructure, and $2.6 billion for commercial renewables between 2019 and 2023.
The company is also expanding its renewable asset base. With respect to its commercial renewables business, it continued to expand its wind and solar portfolio in 2018, with capacity nearing 2,900 megawatts (MW) across 14 states, comprising 21 wind and 64 solar facilities.
Duke Energy Florida is adding more solar power to its portfolio along with modernizing grids to provide cleaner energy. The rate review, if approved, will enable the company to strengthen its electric grids to face frequent climatic calamities.
Utilities Spending for Infrastructure Strengthening
Other Utilities are also making investments to strengthen their infrastructures. FirstEnergy Corporation (FE - Free Report) , under its “Energizing the Future”, plans to invest $4.8 billion in capital between 2018 and 2021 in its Regulated Transmission operation and also targets to invest $6.2-$6.7 billion during the same period to strengthen its distribution network.
NextEra Energy, Inc (NEE - Free Report) is planning to invest $36.6 billion in different projects between 2019 and 2023 to modernize and strengthen its infrastructure.
Dominion Energy Inc’s (D - Free Report) long-term capital spending plan of $26 billion for the expansion of electric transmission and distribution, and the addition of renewable assets, natural gas facilities and midstream assets bodes well.
Duke Energy gained 2.6% in the last 12 months compared with the broader industry’s growth of 14.8%.
Zacks Rank & Key Picks
Duke Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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