Duke/Progress Merger Nearly Final
Fri August 24, 2012
Duke/Progress Merger Nearly Final
Updated 4:38 p.m. June 29
Duke Energy had hoped to finalize its $26 billion merger with Progress Energy this weekend, but it looks like they'll have to wait a few more days. North Carolina Utility regulators gave their approval to the deal on Friday, but South Carolina regulators won't rule until at least Monday. WFAE's Julie Rose reports Duke and Progress are on the verge of becoming the largest utility in the nation.
The merger is about six months behind the schedule Duke Energy originally announced in January 2011. It probably was a bit ambitious to hope such a large combination could happen in just one year.
Despite the delay, Duke Energy spokesman Tom Williams says, "The company will largely be what we had envisioned."
It will have seven million customers in six states and 27,000 employees.
About 1,800 jobs will be cut either through voluntary buyouts or attrition. Williams says most of those cuts have already happened.
The company's corporate headquarters will be in Charlotte under the direction of Progress Energy CEO Bill Johnson. Duke CEO Jim Rogers will step out of his day-to-day role and become company's executive chairman.
Jim Rogers speaks with attendees at Duke Energy's annual shareholder meeting in May. Photo: Julie Rose.
Just last month at Duke's annual meeting, Rogers was a little cautious about the merger's chances. Federal regulators had twice rejected the deal.
"It will be either third-time-charm or three strikes and your out," said Rogers.
The third time was a charm, but Duke and Progress had to make some expensive concessions.
Federal regulators worried the merged behemoth would be too much of a monopoly among wholesalers in the Carolinas. The companies agreed to give competitors more access to the wholesale market by spending more than $100 million to build new transmission lines. To please state regulators, Duke and Progress had to make a host of promises, including savings to retail customers of $650 million.
The Public Staff, which is a state agency that advocates for utility customers, says the merger is a good deal.
"It basically covers everything and more that most people could think of," says Gisele Rankin, senior attorney for the Public Staff.
Their stipulations include a provision that Duke and Progress can't pass on to their customers the cost of severance packages for employees (expected to be more than $200 million.)
But the companies make no promises about raising electricity prices. Duke says tougher environmental regulations are forcing the company to make expensive upgrades and build new plants that pollute less. Duke's rates went up about seven percent this year.
Another rate hike is coming.
"That's just a part of long-term doing business," says Duke spokesman Tom Williams. "We're shutting down older plants, bringing on new plants - those plants have to be paid for if we're going to stay a healthy company."
Earlier this week, Duke's CEO sat for a private 2 1/2 hour meeting with about a dozen shareholders and environmental activists. Afterward, the activists aired their grievances to reporters.
"I feel like we're on the Titanic and Jim Rogers is the captain of our ship and he says they can't make any changes," said Deb Arnason.
She and others want Duke to stop building new coal and nuclear plants and shift to renewable energy like wind and solar.
Williams says Duke can't abandon any single power source, but notes new technology is improving the company's emissions.
"We're making progress," said Williams after the meeting with activists. "Is it as fast as these folks want it to be? No it's not."
Jim Warren of the watchdog group NC WARN says he was, "quite disappointed that the bottom line seems to be for Duke Energy 'business as usual' for the next several decades."
Eighteen months ago, Warren says he was hopeful about the Duke/Progress marriage.
"This is an opportunity - because they would be so large - to really help shift the regional and national economy to a clean-energy economy," says Warren. "That's partly why today is so disappointing."
That sentiment suggests Duke and Progress can expect to become the target of even more critics as they combine into the nation's largest utility.