Thu August 16, 2012
Blended Duke/Progress Fleets Bring Savings
The merger between Duke and Progress Energy is still under investigation by state regulators, but that hasn't stopped the companies from moving ahead with the marriage.
They're actually obligated to start generating significant savings for customers right off the bat. Much of those savings originate in a heavily-secured room full of computer screens at Duke's Uptown headquarters.
As marriages go, Duke and Progress are a blended family in the Carolinas, not unlike the Brady Bunch.
Each company brings a passel of kids to the union: 24 on the Duke side, 18 for Progress. Those are the major power plants they operate North and South Carolina, all now under the watchful eye of a single housekeeper.
John Verderame is the "Alice" to this Brady Bunch of power generation. He's the director of power trading and generation dispatch for Duke and the "trading floor" is his domain.
The trading floor is where Duke and Progress hope to generate about half of the $650 million in savings they've promised to customers as a condition of their marriage. What happens here is not so much "trading" as traffic control.
About 50 people sit at rows of desks facing a wall of monitors and moving numbers.
About half the room comes from Progress, the other Duke.
"We've really mixed everybody together to really get this as efficient as we can," says Verderame.
Their eyes fix on a digital chart up front, showing the expected power demand for the next 24 hours. The "load," as it's called, starts off low on hot summer days and peaks in the early evening when people come home, turn on the TV and crank up the A/C.
Electricity to meet that demand has to be produced on the spot, since there's no way to store it . . . which makes Steve Leyton's job really important.
He's the meteorologist and his task is tougher than it might be on television. It's not enough for Leyton to say, "Mid-80s and sunny today, folks."
"When it comes to demand for electricity, one degree does matter - whether it's going to be 84, 85 or 87 degrees," says Leyton. "So we're trying to get the forecast as accurate as possible at all times."
Every hour of the day for every corner of the Carolinas, Leyton's trying to predict how hot - or cold - it will be. One degree can equal the electricity of an entire coal-fired power plant.
Meanwhile the rest of the dispatch team is trying to figure out which of the 70 different power plants in the Duke/Progress family offers the cheapest way to meet the demand. And just like on the Brady Bunch, there is a favorite.
"Marcia, Marcia, Marcia!" was the rant of jealous TV sister.
At Duke, it's "Nuclear, nuclear, nuclear!"
Nuclear plants are the first choice because they put out enormous amounts of electricity with a relatively small amount of fuel. Hydropower is even cheaper - since water is free - but it's only good in short bursts since reservoirs only hold so much. Coal and natural gas plants come next.
But it's not just the cost of fuel that matters. You also have to consider how fast a power plant can start generating electricity. Nuclear plants, for example, take several days. Coal plants take at least 12 hours. Natural gas plants can switch on in 10 minutes. And sometimes it's actually cheaper to buy electricity from another utility than it is to fire up a plant.
Those decisions happen here on the front row of the trading floor.
Kent Cundiff and Troy Brown sit side by side, more than a dozen computer screens between them. Brown monitors the going rate for electricity on the wholesale market. When the price goes up, he nods to Cundiff, who gives the order to start up a natural gas plant and make a little more electricity in-house.
Ever the watchful housekeeper, Verderame stands over Cundiff's shoulder monitoring how much this whole operation is saving at any given moment.
"This is like a puzzle we put together every day," quips Verderame.
Before Duke and Progress merged, each had fewer options to meet the power demands of their customers. Duke had more nuclear capacity, for example, but Progress had more efficient natural gas plants.
With those fleets blended into one big family, Verderame's team expects to save more than $300 million over the next five years. The company has promised to pass that on to its customers.