Duke Retains 73% of Load at Duke Energy Ohio, Through SSO or Affiliate Retail Sales

Duke Energy is serving about 73% of retail generation load at Duke Energy Ohio, through either sales by Duke Energy Ohio or affiliate Duke Energy Retail Sales, Duke reported in an earnings call yesterday.

That total is down marginally from the 74% served by both companies as of the end of 2010.

As of March 31, 2011, Duke Energy Retail sales is serving 40% of Duke Energy Ohio total load, and Duke Energy Ohio is serving 33% of load. Non-affiliated competitive retailers are serving the remaining 27%.

The gross switching rate (e.g. combining the migration to Duke Energy Retail Sales and non-affiliates) is 67%, versus 65% as of December 31, 2010. Duke Energy Retail Sales serves 60% of migrated customers.

Duke said that the stabilization in migration seen in the third and fourth quarter of 2010 has continued into 2011, as shown by the only 2% change in gross switching through the first three months of the year. Duke does not expect a significant change in customer switching levels for the remainder of the year.

Affirming its earliest forecast, Duke continues to expect a $66-$80 million negative earnings impact for net switching in 2011.

Duke Energy CEO James Rogers reported that Duke Energy Ohio continues to evaluate several options for its next Standard Service Offer filing, including the possibility of filing an electric security plan (ESP) proposal in the second quarter. Duke Energy Ohio had previously filed for a Market Rate Offer, but the filing was rejected by the Public Utilities Commission of Ohio as non-compliant; PUCO is now considering the matter on rehearing.

"It is critical that the state implement policies giving utilities the appropriate level of financial protection, allowing them to make capital investments in Ohio," Rogers said.

Not surprisingly, given that PUCO has rejected all three Market Rate Offer applications filed by utilities to date, Rogers said that, if he were betting, PUCO will favor an ESP over an MRO. "The truth of the matter is, the Commission wants to continue to have control over the low cost coal plants that we own, and we're perfectly comfortable with them having control, as long as we get a fair return on that investment," Rogers said.

"And that has been really the whole debate, in terms of working our way through this in a fair return that is not bypassable. And it could be a demand charge, it could be designed a number of different ways. But we think it's really critical that if they want us to commit the assets, and we do commit the assets, and it might be for 10 years or 20 years or longer, if they're going to get that benefit, we need to get a fair return on it."

Duke Energy's Commercial Power unit reported first-quarter 2011 segment EBIT from continuing operations of $91 million, compared to $129 million in the first quarter of 2010. Results reflect the effects of 2010 customer switching in Ohio and lower mark-to-market impacts from economic hedges. These were partially offset by favorable results from Duke's Midwest gas assets due to higher volumes and capacity prices, as well as better than expected results from Duke Energy Retail Sales. Duke said that Duke Energy Retail Sales' cost to serve was lower than expected.

Duke Energy has not yet filed a 10-Q.