Duke Energy must defend controversial takeover after hiding over $2 billion in planned investments that wipe out required public benefits, group tells regulators
Durham, NC – State regulators must reopen evidentiary hearings and require Duke Energy to prove why its already-sullied takeover of Progress Energy should not be revoked, climate-energy watchdog NC WARN said today in a set of legal filings with the NC Utilities Commission. The preliminary investigation has shown that only formal hearings will sort out all the issues and bring out important facts that were concealed from the Commission, the group said.
One of the motions is a formal request for reconsideration of the Commission’s June 29 approval of the merger, a necessary step toward a closer examination of the newly disclosed costs of the merger.
The group says Duke Energy failed to disclose about $2.5 billion it plans to charge customers for major improvements planned for Progress’ nuclear plants over the next two years, including corporate profit. About $1.8 billion of that would be in the Carolinas, and is roughly three times the $650 million Duke-Progress officials claim the merger would save Carolinas customers over six and a half years.*
NC WARN also said Duke-Progress failed to apprise the Commission about their latest findings involving prospects for costly and complicated repairs of the containment building at the Crystal River nuclear plant, which Progress cracked three times by attempting to save money on a plant upgrade operation. That multi-billion dollar mistake could impact Carolinas customers by raising Duke’s borrowing costs and by forcing more of the parent company’s dividends to be borne by North Carolinians, according to the watchdog group.
“Billions in undisclosed rate hikes turns the merger into a net public soaking instead of the net public savings legally required of such a corporate merger,” said NC WARN’s Jim Warren today. “The Commission must finally re-focus away from the multi-millionaire soap opera and on to its core duty – protecting the public.”
Warren added that investments to repair or upgrade power plants are always charged to customers along with a hefty mark-up allowed by state law governing utility monopolies. And he said the new numbers would spell rate hikes on top of big increases already planned for Duke-Progress customers across the Carolinas later this year.
Since the Triangle Business Journal first reported the planned fleet improvements last Friday, Duke has claimed the investments are merely part of ongoing operations. Warren dismissed that claim today by emphasizing that Progress has not routinely made large investments in its nuclear fleet since its last general rate hike in 1988. He also said Duke apparently treats power plant upgrades as profit opportunities in an aggressive way that Progress did not, so the fleet investments and resulting rate hikes might not occur without the merger.
Jim Rogers and the two Duke directors cited the Crystal River debacle and the condition of the Carolinas nuclear fleet as key reasons Duke fired incoming CEO Bill Johnson. NC WARN says their testimonies are even more proof that all information relating to these issues must be thoroughly considered within the original merger docket, and subject to cross-examination.
NC WARN alerted the Commission in mid-June about new information involving billions of dollars at risk at Crystal River, at Progress’ Levy construction project inFlorida, and with Duke’s potential investment in the troubled Summer nuclear project in South Carolina. But the Commission declined to examine those issues or to allow NC WARN to cross-examine Duke-Progress witnesses about them during a limited June 25 hearing as the utilities pressed for merger approval by July 1.
Within days, the Commission called new hearings to grill Duke’s Jim Rogers about the controversial firing of CEO Bill Johnson shortly after the merger closed on July 2.
Jim Warren added today, “We remain very concerned that the Commission, during three days of hearings since July 10th, seemed to carefully avoid any discussion about the costs of the nuclear fleet upgrades and Crystal River, while frequently agreeing with utility witnesses that the merger is still a good deal for customers. Now we urge the Commission to help restore public confidence by ensuring that all cost and rate information finally be placed on the table for a rigorous and transparent review by all intervening parties.”
For years NC WARN has criticized Progress Energy management for corner-cutting at its nuclear plants, including noncompliance with fire protection regulations for more than two decades. After Rogers told the Commission that he planned to “pour money” into correcting Progress nuclear fleet deficiencies, NC WARN told the Commission such a plan could cost billions.
Today NC WARN said the fleet upgrades could lead to a 12-15 percent rate increase – far exceeding the purported total savings of $650 million over six and a half years that would probably save residential customers less than a dollar per month.
In addition, 15 secret deals Duke used to buy large customer support for the merger – and which NCW and media outlets are pressing the Commission to unseal – further erode the claimed “public savings” in the merger.
“This surely requires full-blown examination by the Commission and all interveners,” said attorney John Runkle today. “We haven’t seen any evidence that Progress planned to spend that money, but more importantly, it wasn’t disclosed in the merger docket. Therefore, it wasn’t weighed against the proposed savings to customers, the essential legal standard.”
* The fleet upgrades total nearly ten times more than the purported merger savings during the next two years – the period during which the investments would be made, according to Duke’s schedule. Although customers would pay the $2 billion through higher rates over time, they would become obligated for that amount when the investments are made.