Duke, Progress CEOs warn of possible rate hikes after merger

Staff writerSeptember 20, 2011 

UTILITY.092011.TI

Duke CEO Jim Rogers, left, and Progress CEO Bill Johnson appear in the N.C. utilities commission meeting this afternoon. The public hearings on the proposed merger between the two companies started Tuesday, Sept. 20, 2011.

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  • What: Public hearings on the Duke-Progress merger.

    When: 9 a.m. today.

    Where: Dobbs Building, 430 N. Salisbury St., Raleigh.

    Room: Commission Hearing Room 2115

    The N.C. Utilities Commission begins public hearings today on the proposed merger between Duke Energy and Progress Energy. The hearings could last the entire week as commissioners hear from a parade of witnesses and experts.

    Today, the hearing room is expected to be standing-room-only as residents line up to speak during the first portion of the proceedings. Duke CEO Jim Rogers and Progress CEO Bill Johnson will make their case for the merger after citizens have their say.

  • The N.C. Utilities Commission is an independent agency. Members are appointed by the governor for eight-year terms and are paid $123,198 a year. The commission chairman is paid $137,203 a year.

    Edward S. Finley Jr., chairman

    Appointed by Gov. Mike Easley in 2007; reappointed by Gov. Bev Perdue in July. Finley was a lawyer in private practice for 33 years and specialized in utility regulation.

    Lorinzo Little Joyner

    Appointed by Gov. Mike Easley in 2001; reappointed by Gov. Bev Perdue in 2009. Joyner worked for 20 years as a government lawyer.

    William Thomas Culpepper III

    Appointed by Gov. Mike Easley in 2006. He was a Chowan County attorney from 1979 to 2005, and a member the N.C. House from 1993 to 2005.

    Bryan E. Beatty

    Appointed by Gov. Mike Easley in 2009; reappointed by Gov. Bev Perdue the same year. He was the Secretary of the N.C. Department of Crime Control and Public Safety from 2001 until 2009, and directed the State Bureau of Investigation from October 1999 to January 2001.

    Susan Warren Rabon

    Appointed by Gov. Mike Easley in 2009. She joined the N.C. Attorney General's Office in 1993; in 2001, she became one of Easley's top three advisers.

    ToNola D. Brown-Bland

    Appointed by Gov. Bev Perdue in 2009. A former staff attorney at the N.C. Utilities Commission. From 2005 until her appointment, she was associate general counsel with the City of Greensboro.

    Lucy T. Allen

    Appointed by Gov. Bev Perdue in 2010. A former middle school language arts teacher, she served eight years on the Franklin County Board of Education, and then as mayor of Louisburg for 16 years. She was elected to the N.C. House in 2002 for the first of four terms.

    Source: N.C. Utilities Commission

The chief executives of Duke Energy and Progress Energy said this afternoon their companies plan to seek rate increases soon to meet a deadline to recover severance payments that will be paid to employees who lose their jobs as a result of the utilities' merger.

Severance costs remain the single biggest unresolved issue related to the Duke-Progress merger, which was announced in January and expected to close before the end of the year. It's not clear how much the severance will cost customers in their monthly bills, but the electric utilities could end up paying out several hundred million dollars. The companies expect to shed 2,000 positions over three years, at least some of them from layoffs and voluntary buyouts. Duke CEO Jim Rogers and Progress CEO Bill Johnson outlined their strategy during hearings in Raleigh before the N.C. Utilities Commission, which is reviewing the merger. The commission is expected to approve the merger, but could impose conditions and terms to guarantee more public benefits. The state's consumer advocate, the Public Staff, has already vowed to oppose a request to make North Carolina households and businesses pay the severance costs. Public Staff Director Robert Gruber said the companies and their shareholders should eat the merger costs, not pass them on to customers. Duke has asked for a 15 percent increase earlier this year and plans to make another request before the end of 2013. Progress expects to make a request next year. Rate requests must be approved by the utilities commission. The executives said making customers pay for the severance is justified because customers are the ones who will ultimately benefit from the merger. "The severance cost is the cost I would describe to achieve the savings," Rogers told the commission. "In the longer term, those savings will benefit the customers." The seven-member commission spent an entire day hearing testimony in the first day of public hearings Tuesday. The commissioners heard from both executives, from more than two dozen residents and from lawyers. Rogers and Johnson warned that utility rates are going to increase as their companies embark on a multibillion dollar phase of power plant construction and other costly upgrades, including compliance with stricter environmental rules. Johnson, who will lead the combined company after the merger, said the $26 billion deal "would help us maintain lower rates than would otherwise be possible." The companies have agreed to pass on $650 million in fuel and related savings over five years to their customers. And they said they would contribute $15 million to public benefit funds to aid low-income residents. Advocacy groups are asking the commission to make the companies contribute more money. N.C. Waste Awareness and Reduction Network, based in Durham, wants the companies to chip in $270 million. Alfred Ripley, a lawyer for the N.C. Justice Center, said during a break in that contributions for low-income residents should be indexed to executive salaries at both companies. "I would like to see them asked why they're paid so much," Ripley said. "Why do you think you need $6 million a year? Would you leave if you were only paid $3 million?"

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