South Carolina Regulators Approve Duke's Storm Cost Recovery, Easing Near-Term Bill Pressures but Core Risks Linger

What happened

South Carolina regulators have approved Duke Energy's proposals to implement customer bill changes starting in 2026, aimed at recovering costs from Hurricane Helene and funding grid-hardening investments. This move aligns with Duke's strategy to manage recurring storm exposures, which the DeepValue report highlights as a significant risk due to high restoration costs that reached ~$2.8bn net of insurance in 2024. The report notes that while recovery mechanisms like securitization help, Duke's high leverage (net debt/EBITDA ~5.7x), planned equity issuance (~$6.5bn through 2029), and environmental liabilities remain persistent concerns. The regulatory approval mitigates immediate bill impacts for customers and supports cash flow, but it doesn't address broader issues like the gas-heavy decarbonization capex plan or potential regulatory pushback in other states. Therefore, this news is a positive but incremental step in Duke's regulatory narrative, not a game-changer for the investment case outlined in the report.

Implication

The regulatory green light allows Duke to recoup Hurricane Helene costs through customer bills, enhancing financial predictability and reinforcing its ability to pass storm expenses to ratepayers. It demonstrates continued regulatory support in South Carolina, a positive signal for future rate cases and grid investments. However, the approval doesn't alleviate high leverage or the need for significant equity issuance, which could dilute earnings and pressure the balance sheet. Storm costs remain a recurring risk, and this event doesn't prevent future outages or associated expenses, as highlighted by the DeepValue report's watch items. Investors should view this as a minor positive that maintains the status quo rather than a catalyst for re-rating, given the stock's full valuation and execution risks.

Thesis delta

This news confirms that South Carolina regulators are supportive of Duke's storm cost recovery, aligning with the DeepValue report's emphasis on regulatory outcomes as a key monitor. However, it doesn't shift the overall thesis from 'WAIT' to a more bullish stance, as core risks like high leverage, environmental costs, and the gas-heavy transition remain unchanged. The event may slightly reduce downside risk from storm costs but is insufficient to provide the margin of safety needed for a stronger investment recommendation.