Free and Proper Elections

NCFPE Poltical Blog and News Tracker

Free and Proper Elections - NCFPE Poltical Blog and News Tracker

Respite from the maelstrom: Court upholds approval of Duke – Progress Energy merger

SM3042014

The state Utilities Commission properly approved the merger of Duke Energy and Progress Energy in 2012, the North Carolina Court of Appeals ruled today.

In a unanimous opinion, the three-judge panel ruled that the commission had substantial evidence placed before it, adequately considered the potential costs and risks of the merger and weighed them against the anticipated benefits.

“We will not second guess the Commission’s determination that the merger is justified by public convenience and necessity,” Judge Douglas McCullough wrote for the panel. “Thus, we affirm the Commission’s approval of the merger.”

The energy advocacy group NC Waste Awareness and Reduction Network had challenged that approval, saying that the commission gave its blessing without making adequate cost-benefit findings, particularly with regard to the impact of the merger on low-income customers.

As one of several conditions to approval, for example, Duke Energy promised a one-time $15 million payment to go towards workforce development and assistance to such customers – an amount NC WARN said was insufficient.

But Duke Energy said that customers would receive fuel savings of nearly $650 million over five years as a result of the merger.

The group did not ask the court to undo the merger but rather argued that the judges should send the case back to the commission for more detailed consideration of how the merger would affect residential customers.

“I’m not surprised by the decision,” said John Runkle, an attorney for NC WARN. “My client still feels that there’s no benefit for the ratepayer from the merger. Any fuel savings would have to be passed along to the ratepayer anyway. The benefits are for Duke.”

Though a good result for Duke Energy, the ruling comes on the heels of the coal ash debacle and in the midst of a recently-announced audit by the Federal Energy Regulatory Commission, which is reviewing possible misstatements by Duke during the merger approval process.

At the very least, these recent events give rise to new questions about the company’s bona fides during the merger approval process and cast some doubt upon savings that might inure to customers, particularly given the billions in costs Duke Energy now faces for coal ash cleanup and remediation.

 ***

It’s been nearly two years since Duke and Progress Energy asked the state Utilities Commission to approve a merger of the two companies, pitching the move as necessary to strengthen the merged entity’s balance sheet and enable it to meet costs expected to retire old plants and build new facilities.

After public hearings and vetting by both FERC and the Utilities Commission, the merger was approved subject to conditions near the end of June 2012.

At the time, the commission found that anticipated benefits of the merger outweighed any anticipated costs and risks.

As part of the deal, the new Duke Energy would become the largest utility in the nation and promised among other things some $650 million in fuel savings to customers and also pledged $15 million for workforce development and assistance to low-income customers.

In arguments before the court in November, NC WARN’s attorney portrayed those savings as temporary, noting that the company had already sought a rate increase, and insignificant, given the worth of the merged company.

They represented just a one-time deal spread out over five years for customers in both North and South Carolina, the group’s attorney John Runkle said.

And when broken down by all the wholesalers, municipalities and others getting a piece of the savings through settlements reached during the merger approval process, that meant just about a dollar a month for the 40 million Duke residential customers here, he added.

As for the one-time $15 million payment which Duke tagged for workforce development and for assistance to low income families, Runkle argued that Duke had offered no factual support that that amount would offset the impact the merger would have on such families.

In contrast, the group said, its own expert projected that a payment of $27 million per year over 10 years for low-income weatherization would be a more adequate response for those in need of assistance.

But Duke Energy argued that it had presented extensive evidence of the risks of the merger to the Commission before approval, and that the fuel savings passed on to customers would be significant.

Without the merger, Duke Energy said in court filings, customers would receive no savings.

The commission properly and unanimously approved the merger, the company continued, after being “presented with a merger that created a stronger utility with the enhanced balance sheet necessary to modernize and build the plants needed by North Carolina for its economy, which guaranteed at least $700 Million in cost savings and other payments for retail customers (including additional assistance to low income households).”

***

Though today’s ruling may be good news for Duke Energy, March could prove to be the cruelest month for the company in the wake of the February coal ash spill at Duke’s Dan River plant.

The U.S. Attorney’s office soon launched a criminal investigation into that spill and then expanded it to include incidents at other Duke plants and subpoenaed the company, as well as employees from North Carolina’s Department of Environment and Natural Resources, to testify before a grand jury in mid-March.

And after initially offering up a $99,000 settlement for contamination at the Asheville and Riverbend plants, DENR pulled back and expanded its coal ash lawsuits against Duke to include all of the company’s 14 sites in North Carolina, hinting that it may seek a more comprehensive settlement that requires the removal of the ash.

Just as public demand for the complete removal of coal ash from unlined ponds across the state is growing, so is suspicion of lax oversight in exchange for possible favors, and scrutiny now has spread beyond wastewater associated with coal ash ponds.

Yesterday, DENR announced that it had cited Duke Energy for failing to obtain stormwater permits for five coal plants:  Belews Creek Steam Station in Rockingham County; Cliffside Steam Station in Rutherford County; Lee Steam Electric Plant in Wayne County; Roxboro Steam Electric Power Plant in Person County; and Sutton Steam Electric Plant in New Hanover County.

The company also now finds itself, according to media reports,  back before the FERC, which has opened an inquiry into whether Duke, pre-merger, understated the amount of wholesale power it could provide to regional utilities.

Making enough wholesale power available to such utilities when they need it was one of several conditions the federal agency attached to its approval of the Duke – Progress merger in 2012.  Some merger opponents contend that Duke Energy has low-balled the amount needed.

What this flurry of activity means for the professed savings to customers as a result of the merger is unclear.

Duke has said that the company, not customers, will bear the costs of clean up at Dan River. The bill for that could reach $1 billion, if the 2008 spill in Tennessee is any measure.

But what about the costs of closing other coal ash ponds around the state and complying with new federal coal ash regulations from the Environmental Protection Agency?

Duke CEO Lynn Good said in February that the company expects to recover those costs, estimated in the billions, from customers.

Category: Political News

All comments are held until links can be removed.

Your email address will not be published. Required fields are marked *

*