Duke Deal on State Oversight Could Boost Wholesale Profits

Miller questions whether industrial consumers will even receive the modest cut they have been promised. She says that Duke is in the process of requesting an increase to cover rising fuel costs that, if granted, could totally offset the new reduction.

She says that CUCA will continue to monitor Duke Power's profits -- including those from bulk power sales -- for signs of over-earning. Duke has agreed to disclose its wholesale profits to the utility commission even though it will separate them from regulated earnings. But the commission has promised to leave the new arrangement in place, regardless of how much Duke earns through bulk power sales, for at least a year.

The agreement expires along with the rate freeze at the end of 2007. Some people believe that Duke will then stop sharing -- or even disclosing -- its bulk power profits. Others, however, feel that the commission might finally intervene and review Duke's rates if that happens.

In the meantime, Duke is hoping to strike a profit-sharing deal in its secondary market of South Carolina as well. Duke Power spokesman Tom Williams told TheStreet.com on Thursday that the company plans to submit a proposal to South Carolina regulators in a matter of weeks. At least one Duke insider -- known for blowing the whistle on the company's accounting practices -- doubts that South Carolina regulators will be quite as receptive, however.

Barron Stone, a Duke accountant who provided regulators with evidence that the company had been downplaying utility profits in the past, says that South Carolina isn't restrained by a rate freeze like its neighbor to the north. Instead, he says, the state has managed to get rate relief for customers simply because the company exceeded its allowed return.