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Duke-Progress Merger Contested in NC Court of Appeals – News Release from NC WARN

Regulators shielded Duke from explaining the customer impacts of five (5) billion-dollar boondoggles, says watchdog group

Statement from Director Jim Warren:

Durham, NC – Today NC WARN filed notice with the NC Court of Appeals that it is challenging the NC Utilities Commission’s approval of the merger between Duke Energy and Progress Energy, which created the largest US electric utility.  We are alleging numerous errors in the Commission’s process and its end result, and are seeking to revoke or modify the merger so that Duke’s management and stockholders – not its customers – bear the costs of its corporate mistakes and secret deal-making.

Before approval of the merger and during its subsequent investigation, the Commission refused to act on NC WARN’s efforts to require Duke to address five key issues that bear on the key legal test for allowing the merger: whether it is in the customers’ interest.

Duke claimed, and the Commission agreed, that the merger would save retail customers $650 million over 6.5 years.  But the Commission refused to allow NC WARN to argue and introduce evidence that those supposed savings could be wiped out many times over by costs that Duke did not disclose:

$  Duke Energy knew the broken Crystal River nuclear plant could cost $5 billion or more, which will impact Carolinas customers by driving up financing costs on capital projects and by driving up corporate revenue requirements in the Carolinas and other states Duke operates in.

$  Duke plans to spend billions of dollars repairing and upgrading the legacy Progress Energy nuclear fleet, which would directly impact North Carolina customers.

$  Seventeen confidential settlements with Duke’s big customers bought support for the merger and could cost small North Carolina customers billions of dollars over time.

$  Duke is rumored to be considering a much higher investment in the Summer nuclear construction project than it has publicly admitted.  The project is already suffering delays and millions in cost overruns.  While it is located in South Carolina, Duke’s share would be paid 70% by North Carolina customers.

$ The quadrupling – to $24 billion – of the estimated price tag for the proposed Levy nuclear plant in Florida could impact NC customers by driving up corporate revenue requirements and financing costs on capital projects

In short, the Commission failed to question Duke about any of those issues, disallowed NC WARN from questioning Duke about them, and refused to require Duke to even explain why those issues should not have relevance in the merger proceeding.

NC WARN has argued that the Florida projects will impact North Carolina customers indirectly, as noted above.  But last week’s revelation by the Tampa Bay Times about inadequate insurance company reserves means the Crystal River fiasco could cost Duke’s Carolinas customers tens of millions of dollars in direct costs if all US plant owners are required to pitch in to offset the insurer’s shortfall.

Meanwhile, the Commission brokered a closed-door settlement over alleged merger improprieties, the soap opera surrounding the firing of CEO Bill Johnson, while continuing to ignore the impact on customers of the primary reasons Duke fired him – Crystal River and the need to upgrade Progress’ under-maintained nuclear fleet (a claim Johnson disputes).

In ignoring key merger costs, the NC Utilities Commission helped lock in Duke’s business plan for serial rate hikes to build dirty and dangerous power plants North Carolina does not even need.

Today’s filing begins the appeal process, with the record and brief to be filed soon.  We are confident that the judges will agree that the merger must be either revoked or significantly altered – which could lead to Duke shareholders shouldering more of the billion-dollar mistakes Duke wants to foist on families, local governments, and small businesses.

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