Power customers may foot bill for Duke-Progress layoffs

CEOs say it makes sense to pass on severance costs

Staff WriterSeptember 21, 2011 

— The chief executives of Duke Energy and Progress Energy said Tuesday that their companies will have to raise electricity rates to cover the cost of severance payments that will be paid to employees who lose their jobs as a result of the utilities' merger.

Who pays for severance costs remains the single biggest unresolved issue related to the Duke-Progress merger, which was announced in January and is expected to close before the end of the year.

Duke CEO Jim Rogers and Progress CEO Bill Johnson outlined the rationale for the merger during the first day of hearings before the N.C. Utilities Commission in Raleigh. The commission is expected to approve the $26 billion deal but could impose conditions and terms to ensure greater public benefits.

The seven-member commission also heard from more than two dozen residents, almost all of them opposed to the merger on economic, political and moral grounds. Speakers alluded to the poetry of Robert Frost and Dr. Seuss stories in their wide-ranging arguments against the merger.

The hearings continue today and could last the rest of the week.

Advocacy groups are expected to argue that Charlotte-based Duke and Raleigh-based Progress should be required to offer compensation for the economic damage they will cause with the planned elimination of 2,000 jobs.

Rogers and Johnson warned that utility rates will 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."

It's not clear how much the severance will cost Duke and Progress customers, but the electric utilities could end up paying out several hundred million dollars.

The state's consumer advocate, the Public Staff, argues that the companies and their shareholders should eat costs associated with the merger, rather than pass them on to customers.

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," he added.

Many speakers urged the Utilities Commission to require the merged company, to be called Duke Energy, to make greater strides in green energy and subsidization of low-income home weatherization programs.

Speakers traveled from Charlotte, Boone and other far-flung regions of the state to lobby the utilities commission on Tuesday.

"While the merger may save funds in redundancies and greater efficiency, we hope that you will effectively limit excessive compensation by ensuring that greater funds are directed to helping North Carolina's poor instead of giving executives high compensation packages," said Alfred Ripley, a lawyer with the N.C. Justice Center in Raleigh.

Added Beth Henry of Charlotte: "We need to weatherize every existing building in North Carolina, avoiding new power plants."

john.murawski@newsobserver.com or 919-829-8932

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