Duke-Progress merger wins backing from key panel

News & ObserverSeptember 3, 2011 

Progress Energy and Duke Energy have won key backing for their planned $26 billion merger in this state as the two power companies speedily advance in their bid to form the nation's biggest electric utility.

But advocacy groups were quick to denounce the utilities' deal with the Public Staff, the consumers' advocate within the N.C. Utilities Commission. The deal requires the two utilities to share millions of dollars in merger savings with their customers but does not call for rate cuts or environmental promises.

The blessing from the Public Staff removes a significant obstacle to getting the merger approved by the N.C. Utilities Commission, potentially the most challenging regulatory review the merger could face. Public Staff reviews are presumed to consider the best interest of the public and carry much weight with the utilities commission.

Still, the benefits will be barely perceptible to Progress and Duke customers. The main provision of the agreement - giving back $650 million in fuel and related savings over five years - will amount to about 50 cents a month for a typical residential customer, increasing to about $1 a month in later years.

"I think we've gotten the best we can," said Robert Gruber, who directs the Public Staff agency.

The deal conspicuously omits stringent terms - such as rate cuts, rate freezes and promises not to lay off employees - that have been imposed on utility mergers in other states in past years. Even regulators in Kentucky, where Duke has 135,000 electricity customers, imposed a two-year rate freeze on the Duke-Progress merger as a condition of their approval.

Meanwhile, just a day before the deal was announced with the Public Staff, Progress said it would eliminate 700 to 1,000 positions in downtown Raleigh - up to half its downtown workforce - as the combined company's headquarters are consolidated in Charlotte.

Gruber said the agreement reflects only a portion of the benefits customers will see. The combined utility is expected to achieve a 6 percent savings on operating costs through staff cuts and other reductions, which will amount to about $340 million a year and will be passed on to customers in the coming years.

But those cost savings would come from public hearings and are not guaranteed, making future benefits uncertain and leaving some nonprofit groups frustrated with Friday's outcome.

"It's disappointing," said Al Ripley, director of consumer and housing affairs at the N.C. Justice Center. "It's a pittance, a drop in the bucket."

A number of advocacy groups and environmental organizations next week plan to present the Utilities Commission with their own wish list: more energy-efficiency programs and other concessions.

They will argue that such measures are ultimately cheaper and cleaner than building new power plants, and therefore a greater public benefit.

The fuel-related savings were touted as early as January when Duke and Progress announced their merger plans. The Public Staff deal, if approved by the Utilities Commission, goes beyond good intentions: It would force the companies to share the $650 million over five years even if the utilities fail to achieve their savings goal.

"This is a guarantee," Progress spokesman Mike Hughes said. "We're talking about a significant level of customer benefit and community support."

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