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?"