North Carolina Utilities Commission:

What is it?

Created by the NC General Assembly, the North Carolina Utilities Commission is the regulating body for public utilities (electric, telephone, natural gas, water, water resale, household goods transportation, buses, brokers, and ferryboats). The members of the commission and the consumer advocates known as the Public Staff serve as a proxy for competition. The commission provides pressure through policy and regulation that serves to counteract the monopoly the utility companies have on their services.

Who are the decision makers in the NCUC and how are they selected?

All seven members of the commission are appointed by the Governor. Members are then confirmed by the General Assembly. Throughout their eight-year term, members of the Commission are prohibited by law from "engaging in any other employment, business, profession or vocation.”

The Commission is advised by the Public Staff, a group representing consumer interest. They ensure rates are reasonable and services are adequately provided. The Executive Director of the Public Staff is appointed by the Governor, subject to the confirmation by the General Assembly for a six year term.

How are utility rates determined?

The NCUC’s legal mandate is to ensure that utilities provide reliable service that’s the most efficient and the least costly. To assess that, commissioners consider the bottom line. Their formulas factor in the cost of compliance with state and federal regulations, but they don’t set energy policy. Working from the laws passed by the legislature, they make the rules for how utilities should comply.

Rates are made up of three major factors.  (Click chart for large version.)

Fuel cost, the most volatile, makes up 30-40 percent of the rate. Utilities must report their fuel costs to the Commission annually. If the price of fuel has dropped during the year, the fuel rate drops, too. That’s a legal requirement. Utilities aren’t allowed to make a profit from fuel prices.

Profits and debt service make up about 17 percent. State law mandates that for-profit utilities must be allowed to make a “reasonable” profit. A healthy rate of return is important because utilities compete with other investments to attract private capital. They need those investments to - in part - finance new plants, which are very costly.

The remainder of the rate revenue – 40 to 50 percent - goes to cover utility operations, maintenance and other costs of doing business.

Who oversees the NCUC?

The NCUC is overseen by the legislature and subject to the Joint Legislative Utility Review Committee. But the Oversight Committee took a hands-off approach from the mid-1990s until about 2007, rarely meeting during that time. In recent years, amid increasing concern about climate change and under different leadership, the Committee is returning to a more active role in directing the NCUC's policies.