By Bob Geary
The drama of Bill Johnson’s 20-minute tenure as CEO of the new Duke Energy Corporation has consumed the members of the N.C. Utilities Commission, who are wondering if Duke hoodwinked them into approving its merger-acquisition of Raleigh-based Progress Energy.
In three days of hearings over the past two weeks, the commission grilled Duke and Progress leaders about Johnson’s fate—one that included a $44 million severance package. Commission members asked why they were misled into believing the ex-Progress chief would head the new corporation, when Duke’s board—which called the tune—planned to ax him at the first opportunity.
Lost in the explanations of why Johnson was or wasn’t the right man to lead a $100 billion corporation—explanations made by people who earn seven figures a year—was the real question for North Carolina consumers: Is the Duke-Progress merger in the public interest, Johnson or no Johnson?
The answer, from the available evidence, is that the 3.2 million customers in North Carolina who buy electricity from Duke/ Progress will gain only if more nuclear plants are needed to meet future demand.
If renewable energy sources such as solar, wind, cogeneration and conservation prove less expensive than nuclear power, as many energy, environmental and consumer experts believe they will be within a few years, then the Duke-Progress merger may prove a monumental mistake.
The logic of the merger, if there was any, is this: After the merger, the new Duke supposedly has the power to finance multi-billion-dollar nuclear plants, whereas pre-merger, Duke and Progress were struggling to do so.
The two companies furnished the commission with the opinions of three investment firms as part of their application. The three—Oppenheimer, Bain and Bank of America—agreed that the two companies operating as one would save little in operating costs. But the firms also foresaw that if Duke and Progress merged, they would, in Bain’s words, “[be] well-positioned to pursue nuclear investment opportunities in the Carolinas.”
The investment firms were considering the merger’s prospects for Duke and Progress shareholders. The job of the utilities commission, though, was to judge the merger in terms of “net public benefit” for consumers.
In that vein, the promised savings were little, a total of $650 million spread over six and a half years. That amounts to just $100 million annually, or roughly 1 percent of what the new Duke will collect from North Carolina customers.
The figure was reached in negotiations between the two utilities and the commission’s public staff, which went on to support the merger.
And even that number of $650 million is suspect, as the industry watchdog group NC Waste Awareness & Reduction Network (NC WARN) points out. About half of that amount is supposed to result from lower fuel costs produced by the combined companies’ greater buying power. NC WARN Executive Director Jim Warren thinks some fuel savings were in store anyway because natural gas prices are dropping.
More worrisome, Warren says, is that the applicants, Duke and Progress, were allowed to cut a secret deal with large industrial users—one of 15 such deals disclosed to the commission but not to those, like NC WARN, who wouldn’t promise not to disclose them to the public.