Duke, Progress Deal Raises Energy Profile Of
Mon January 10, 2011
Duke, Progress Deal Raises Energy Profile Of Charlotte
MARK: Duke Energy announced Monday it will acquire Raleigh-based Progress Energy for nearly $14 billion in stock and become the largest utility in the country. WFAE's Julie Rose has been following the story and joins me now to talk about what the news means for Duke customers, and the Charlotte region as a whole.
So, Julie, first off - why are these two companies merging?
JULIE: They say it's to become more efficient and to be in a better position for the challenges that lie ahead. One of the big challenges is that traditional coal power plants outdated. Duke and Progress are building new ones to meet increased environmental regulations. They're also struggling to pay for new nuclear plants. Joining forces means Duke and Progress have more resources to work with.
Otherwise, Duke and Progress are healthy companies. They've reported strong earnings over the last several quarters - extremely hot and cold weather have helped.
MARK: So this new, bigger Duke Energy will be the dominant utility in six states and the largest in the country. This would seem to boost the efforts of local leaders who want to create an "energy sector" in Charlotte, wouldn't it?
JULIE: Absolutely. In fact, Mayor Anthony Foxx says this merger boost the energy industry to a level that rivals banking in Charlotte.
FOXX: "Anytime you have a number one in any sector, it's huge. A lot of suppliers will want to be closer to the headquarters. And that also means jobs."
MARK: Mayor Foxx is hopeful that more jobs will come to Charlotte as a result of a merger between Duke and Progress - but don't we usually see job cuts in mergers like this?
JULIE: Yes. And there will be layoffs at Duke and Progress, too, though company officials aren't giving details. None of the job losses would happen until after the merger is approved by regulators - could take a year.
MARK: So this isn't a done-deal until regulators sign off. Which regulators are we talking about?
JULIE: The Federal Energy Regulatory Commission will be looking to see that the merger doesn't consolidate too much market power in one company's hands. Then state utility regulators in North and South Carolina have to approve the deal. Their concern is that the merger doesn't hurt customers and rates.
Duke and Progress say they'll actually save quite a bit of money buying fuel in bulk and being able to dispatch power from all of their different plants to meet demand on a given day. As the merged company lowers costs, those savings would theoretically get passed along to customers. In previous mergers, it's been common to see regulators require that a utility lower its rates as a condition of approval. The thought of having one mega utility dominating the Carolinas, does worry some environmental groups and consumer watchdogs, though. Here's June Blotnick of Clean Air Carolina:
BLOTNICK: "The utility companies individually have a great deal of power in the North Carolina legislature, as well as the NC utilities commission. So merging both utility companies into one would only increase the impact of their control."
Critics point to Indiana where the company is under investigation for having cozy relationships with state regulators and even hiring one of them to come work for Duke.
MARK: If the merger is approved, the new company would be headquartered in Charlotte. Progress CEO Bill Johnson will be the CEO of the combined company. What will become of Duke CEO Jim Rogers?
JULIE: Rogers isn't disappearing. He explained on a conference call today that he'll be more of an advisor on strategy and probably do more speaking out on energy policy. Here's how Rogers explained it on a conference call today.
ROGERS: "We'll be working together on public policy both on state and federal level, so there are many things we'll be working together on, but at the end of the day, he's the CEO and makes the call."
JULIE: Nobody I've spoken to seems all that surprised that Jim Rogers is stepping into more of a 'big picture' role at Duke. He's really made a name for himself speaking about climate change and the need to develop cleaner ways to burn coal. He seems to relish being the "visionary" type.
MARK: What do we know about Bill Johnson who would be the new CEO?
JULIE: He's an attorney. He's been with Progress Energy since 1992 and CEO for the last 3 years. He lives in Raleigh and Duke is saying it will maintain substantial operations there. But I'm also told Johnson plans to have homes in both Charlotte and Raleigh when he takes over as CEO.