Duke Energy to start flow of merger savings

Rate cut, plant efficiencies fund first of $650 million due

bhenderson@charlotteobserver.comAugust 1, 2012 


Neal Mahedy, Generation Dispatcher working at Duke Energy's trading floor, Wednesday. It is where purchases and sales of electricity are controlled. (Davie Hinshaw - dhinshaw@charlotteobserver.com)

DAVIE HINSHAW — dhinshaw@charlotteobserver.com

Duke Energy filed requests Wednesday to pass $89 million in first-year savings – a little less than $1 a month for most customers – to its Carolinas customers following its July 2 merger with Progress Energy.

Duke asked regulators to cut Carolinas rates by $70 million over the next year, the first installment of the $650 million in savings it has guaranteed in the five to six years after the merger.

About half those savings are expected to come from efficiencies in jointly deploying the combined companies’ fleet of power plants. The rest would come from projected savings on fuel, mostly coal.

Customers would save another $19 million, under Wednesday’s filing, by an adjustment of base rates to reflect a new wave of wholesale power sales to other energy companies.

Duke agreed to the power sales, to be done over a period of about three years, to satisfy federal regulators’ concerns that the merger would dampen market competition. Selling the electricity reduces the amount of power-plant capacity available to retail customers.

If approved by N.C. and S.C. utilities commissions, the rate cuts will take effect Sept. 1.

Progress Energy Carolinas and Duke Energy Carolinas will continue to operate as separate utilities under Duke ownership. Typical Progress residential customers would save about 85 cents a month in North Carolina and 80 cents in South Carolina. Duke’s N.C. customers would save 92 cents; S.C. customers, 81 cents a month.

The heart of the merger savings lies behind two locked doors inside Duke’s Energy Center in uptown Charlotte.

Duke’s trading floor is where the company procures energy and “dispatches” – assigns power generation – to specific plants. The goal is to generate enough electricity to meet customer demand as it rises and falls, and to do it as cheaply as possible.

Eighteen months of preparation went into action 15 minutes after the merger’s effective date, midnight July 2.

The floor took on a new task: finding efficiencies in the flow of energy between Progress’ and Duke’s Carolinas power plants.

Progress Energy Carolinas serves the eastern Carolinas and the Asheville area. Duke Energy Carolinas covers much of Western North Carolina and South Carolina’s Upstate.

“The challenge was to get this up and running in some extreme heat (when demand is highest), and the team really came together quickly,” said Sasha Weintraub, a former Progress executive who is now Duke’s vice president for fuels and systems optimization.

A large electronic display at the front of the open room shows which way energy is flowing and updates the cost of energy for each utility every 30 seconds. Peak efficiency comes when the Duke and Progress costs match.

The trading floor relies on complex computer systems guided by 55 employees stationed at computer monitors.

Modelers use weather data, fuel prices, power-generating status and other variables to estimate power needs over the coming seven days.

Dispatchers scan banks of computer screens, cueing generating units to start at the most economic moment.

Traders manage power transfers between Duke and Progress plants, and with other energy marketers. Energy transactions can cover periods as short as 15 minutes.

“This whole floor is an optimization model,” said John Verderame, who manages power trading and generation dispatch.

Henderson: 704-358-5051

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