No refunds after court overturns 2024 Duke Energy rate adjustments

The North Carolina Court of Appeals has determined that the state Utilities Commission made a mistake in 2024 when allowing Duke Energy to raise rates based on unrecovered fuel costs from 2022. Yet a change in state law in 2025 means that customers will see no refunds based on the mistake.

In a pair of unpublished opinions released Wednesday, the Appeals Court reversed Utilities Commission decisions regarding 2024 “fuel rider” rates for Duke Energy Progress and Duke Energy Carolinas.

The fuel rider “accounts for changes in the cost of fuel and fuel-related costs,” according to one opinion. It’s added to a base rate that covers “general costs of operating the utility.” Because predictions about fuel costs “are inherently imperfect,” the commission assesses over- or under-recovery of fuel costs and adds them to next fuel rider through an “experience modification factor.”

In 2023, Duke Energy Carolinas reported $998 million in unrecovered fuel costs for 2022. The Utilities Commission set a fuel rider rate designed to recover those costs. In 2024, DEC reported that it was still going lose out on $8 million in unrecovered 2022 fuel costs. The utility asked for a rate that would include the 2022 costs, along with unrecovered 2023 costs and anticipated costs for 2024.

The Utilities Commission’s Public Staff objected, arguing that state law limited Duke’s ability to go back more than one year, designated as the “test period,” when attempting to address unrecovered fuel costs. The commission ultimately agreed with Duke’s plan. The Public Staff appealed the decision in October 2024.

A unanimous three-judge Appeals Court panel supported the Public Staff’s interpretation of the state law in place at the time of the 2024 fuel rider decision.

“Here, N.C.G.S. § 62-133.2’s plain language indicates that the statute was intended to provide a true-up only for the fuel costs that were incurred during the test period,” Judge John Arrowood wrote. In addition, “decades of prior practice and legislative acquiescence demonstrate the legislative intent to limit true-ups only to under-recoveries incurred in the test period.”

“[T]hrough its prior practice, the Commission, as well as the public utilities requesting fuel charge adjustments, demonstrated an understanding that § 62-133.2(d) only allowed for true-ups of fuel costs incurred during the test period,” Arrowood added. “In the course of over thirty years and seven amendments to § 62-133.2, the General Assembly did not expand section (d) to allow the Commission to incorporate under-recovery of fuel costs incurred outside of the test period, reflecting that the Commission’s prior understanding of § 62-133.2(d) aligned with legislative intent.”

While the case proceeded through the courts, the General Assembly approved a new law in June 2025. The new law removed a provision limiting fuel recovery costs to a designated “test period.”

“Having determined that the plain language of § 62-133.2(d) limits true-ups to over or under-recoveries of fuel costs incurred during the test period, we hold that the Commission erred as a matter of law in setting the 2024 fuel rider rate to incorporate recovery of the 2022 fuel costs,” Arrowood wrote.

“Public Staff requests that we remand the case to the Commission with instructions to order a refund. We decline to so order,” Arrowood continued.

“Normally, where the Commission erred and authorized an unlawfully high rate, a refund to the customers is an appropriate remedy,” the court order explained. “However, here, the recent amendment to § 62-133.2(d) in Session Law 2025-78 nullifies the effectiveness of that remedy.”

“While Session Law 2025-78 does not retroactively apply to the issue of whether the Commission erred, it does allow for public utilities in future proceedings to reach back and true-up under-recoveries that were incurred prior to the test period,” Arrowood wrote. “Thus, even if we ordered a refund, DEC could incorporate the 2022 under-recovery into future EMFs and recoup the refunded amount. As such, ordering a refund would not provide meaningful relief. Instead, we remand to the Commission for entrance of an order consistent with this decision.”

Judges Jefferson Griffin and Michael Stading joined Arrowood’s opinion.

“No refunds after court overturns 2024 Duke Energy rate adjustments” was originally published on www.carolinajournal.com.