Getting more out of the merger

September 26, 2011 

There are a lot of very good reasons to oppose the merger of North Carolina's two regulated electricity giants, Duke Energy and Progress Energy into a giant, new mega-company.

As speaker after speaker told the state Utilities Commission last week, there's the lack of attention to conservation and renewable energy, the planned development of more environmentally destructive coal and nuclear-fueled power, the outrageous sums both spend on executive compensation and the purchase of political influence, the loss of 2,000 or more jobs and many other issues

If, however, there's a single most egregious and overlooked shortcoming in the merger proposal, it has to be this: the utter disdain for doing anything to aid low-income consumers.

Right now in North Carolina, 1.6 million people (or 17.2 percent) live at or below the poverty line (around $22,000 for a family of four). Most spend disproportionate amounts of their inadequate incomes on inefficient appliances in older, poorly weatherized homes. Not only does this hurt people in need, it wastes energy, drives up demand and prices generally and contributes to pollution and climate change. Clearly, tackling this problem would address several important public priorities.

Now, here's what the new merger partners plan to do about it: other than a minuscule, one-time allocation, nothing.

Think about what this means.

Though electricity is sometimes included in the rent people pay, for a huge number of lower-income people it is not. These people must find a way to pay their electric bill every month. Miss a payment and you can quickly find yourself facing a shut-off order. Unlike a lot of states, North Carolina does not prohibit shut-offs for people behind on their payments unless the customer is elderly or disabled (and then only during winter months). Private charitable funds for utility assistance are few and far between.

People who must heat with electricity (especially fixed-income seniors) can easily find themselves paying huge chunks of their income (as much as 20 percent or 30 percent or more) each month in winter.

So what can be done to address this situation?

One solution that clearly leaps out is to require public utilities - the giant, regulated monopolies like Duke/Progress, whose profits and territories are protected by state law - to be a meaningful part of the solution.

There are models in other states to establish large, well-funded, utility-underwritten initiatives to weatherize many thousands of homes and modernize appliances. Other states have aggressive and innovative programs to promote other good conservation practices and even to construct low-income housing that makes use of solar power and other renewable resources. Still others have enacted so-called "percentage of income plans" and expanded shut-off protections for very poor consumers that actually end up saving the utilities and other rate-payers money.

If implemented on a large scale in North Carolina, such programs could take an important bite out of poverty in this state and help rein in explosive growth in the state's carbon footprint.

Unfortunately, at this point, it appears that all the two monopolies (combined assets, $90 billion) are offering along these lines is a pittance: a one-time, $15 million contribution to weatherization in the year following the merger.

In other words, that's a one-time allocation roughly equivalent to the combined annual compensation of the CEOs for the two companies, Jim Rogers and Bill Johnson. It's clearly less than they would spend on advertising and sponsoring sporting events and slapping their name on entertainment venues.

At an average weatherization cost of $5,200 per home, that's enough to handle just under 2,900 out of the roughly 1 million homes in this state that could qualify for weatherization assistance.

So all the state will need after that is 300 or so similar contributions to finish the job! Frankly, you'd think Rogers, Johnson and their two companies would be embarrassed.

No one expects Duke, Progress or a new combined statewide monopoly to solve all of North Carolina's energy and poverty woes. The problems have been long in the making and will not be solved overnight. Still, the notion that North Carolina might allow such a huge and unprecedented event as a Duke-Progress merger to take place without requiring more of a regulated monopoly that exists to serve the public interest than a token, one-time contribution - say, 10 to 20 times more - is shocking.

Let's fervently hope that the Utilities Commission does the right thing and demands much, much more.

Rob Schofield is the director of research and policy development at N.C. Policy Watch. Al Ripley is the director of the Housing and Consumer Affairs Project at the N.C. Justice Center.

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