The North Carolina Utilities Commission will hold a hearing March 18 to consider a proposed settlement that would grant Progress Energy Carolinas an average 5.7% base rate increase.

The settlement between the company and the North Carolina Public Staff would boost rates by $151.4 million in the first year and $183 million the second year.

The increase in year two includes $31.4 million for construction of new natural gas combined-cycle generation at the Sutton Plant in Wilmington, N.C. The company has requested that new rates go into effect June 1.

The average increase is about half the 11% ($359 million) request the company had sought in a rate request filed in October. The settlement includes a return on equity (ROE) of 10.2%, down from the requested 11.25%.

The settlement did not resolve the allocation of the increase among customer classes, the company’s change to a single coincident peak cost allocation factor, or the industrial economic recovery rider proposed by the company.

The settlement is likely to be challenged by the North Carolina Attorney General, which has appealed rate settlements with Duke Energy Carolinas and Dominion North Carolina Power that included ROEs of 10.5% and 10.2% respectively. The attorney general said the regulators failed to balance the needs of the utility’s investors “against the economic conditions and returns that … customers are experiencing.”

The North Carolina Supreme Court heard oral arguments in the Duke case (# 268A12) Nov. 13. The attorney general filed its challenge to the Dominion settlement Feb. 18.