KFP: Kinston, ElectriCities leaders see positive impacts from Duke-Progress merger

by David Anderson

Leaders of Kinston and ElectriCities expect municipal electric customers could see positive impacts from the merger of Duke Energy and Progress Energy, which is expected to decrease their power purchasing costs.

Rhonda Barwick, Kinston Public Services director, said last Friday officials with the N.C. Eastern Municipal Power Agency, the power agency for 32 Eastern North Carolina public power communities — including Kinston and La Grange — were reviewing the 182-page order from the N.C. Utilities Commission approving the merger.

The process had to be approved by multiple federal and state regulatory agencies.

“What we’re interested in is to make sure that no costs related to the merger will affect our public power customers,” Barwick said. “We feel confident that it will not have a negative impact.”

She added: “We’ll know more once they’ve completed their review.”

Fifty-one towns and cities in North Carolina provide power directly to their residents from power generating assets they jointly own with Progress and Duke.

The N.C. Eastern Municipal Power Agency represents 32 communities in the eastern part of the state, and the N.C. Municipal Power Agency 1 represents 19 cities in the western part of the state.

The power agencies also have contracts to purchase supplemental power from Duke and Progress to fully meet their customers’ power needs.

Officials with the power agencies and ElectriCities, the Raleigh-based nonprofit agency which manages their operations and represents them, have watched the merger closely since the process began in early 2011.

“To me the merger is good for the power agencies, and that’s what we said in our filings (with regulators),” ElectriCities CEO Graham Edwards said.

Duke and Progress officials had stated they would not take on any part of the several billion dollars in debt owed by both power agencies, which they took on in the early 1980s to buy into the power plants.

The debt is the primary reason why power bills of municipal customers are typically about 30 percent higher than the bills of private utility customers.

The eastern municipal utilities cannot save their customers any money through debt relief, but they can pass on savings thanks to currently-dropping fuel costs, and lower power purchasing costs negotiated with Progress, Edwards explained.

“It’ll have a very positive impact on the 32 cities in the eastern power agency,” he said.

Edwards said 25 to 30 percent of NCEMPA’s annual $700 million budget goes toward supplemental power purchasing.

Representatives of New Bern and Rocky Mount, members of NCEMPA, hired consultants and attorneys to intervene on the cities’ behalf last year when the merger was being approved by the Federal Energy Regulatory Commission — the FERC has since given conditional approval.

Kinston officials considered intervening as well, and put $12,500 toward the hiring of consultants and attorneys, but eventually decided not to take part.

“Our theory, and the one that I presented to (city) council was that we could spend the money to intervene, but if the federal or state utility commission sided with any city that intervened, then all the NCEMPA cities would actually benefit,” Mayor B.J. Murphy said. “Therefore, we would be financially wiser to pull out of the intervention process; that theory proved to be correct in the sense that the merger has now been approved.”

 

Little change for Progress customers

The state’s Utilities Commission approved the merger last week — Progress Energy Carolinas spokesman Mike Hughes said the South Carolina Public Service Commission is scheduled to meet today and give a final ruling.

“Assuming a favorable ruling there, we expect to close the merger Monday afternoon,” Hughes said last Friday.

If the members of the South Carolina commission approve, Duke’s purchase of Progress will create the largest private utility in the United States.

The combined utilities would serve 7.1 million customers in six states — North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio.

There are more than 15,000 Progress customers in Lenoir, Greene and Jones counties.

Hughes said the merger will not stop customers’ rates from increasing, but it is expected to “mitigate” the effect of future rate increases by increasing efficiency and decreasing fuel costs.

“Over time, as with just about everything else, prices are going up but we expect the merger to help to mitigate those future price impacts,” he said. “We expect to have significant efficiencies between the companies as we integrate our companies and we hope over time that will result in smaller increases for our customers.”

Hughes said Progress Energy customers do not currently have to do anything as the merger takes effect — they can still pay bills online through progress-energy.com, although they will be redirected to another site.

“Our customers will still call the same number for services,” Hughes said. “We will still have the same level of responsiveness to our customers and they don’t need to do anything differently.”

 

Rate changes

Progress rates are expected to change twice in the next year, although those changes are not related to the merger.

Officials have made their annual application to the N.C. Utilities Commission to adjust rates based on fuel costs, as well as the fluctuating costs of energy efficiency programs and renewable energy efforts mandated by the state.

Hughes said, if approved, the net savings will be 66 cents per 1,000 kwh of monthly use.

Progress officials also plan to apply to the NCUC later this year for the first “general rate increase” in 25 years to reflect the costs of “fleet modernization,” which includes converting coal-fired power plants to natural gas, and investing in transmission and distribution lines.

 

The Raleigh News and Observer and the Associated Press contributed to this report.

 

David Anderson can be reached at 252-559-1077 or danderson@freedomenc.com. Follow him on Twitter at DavidFreePress.