Previewing Duke Energy's Shareholder's Meeting
MARSHALL: Duke Energy shareholders will gather in Charlotte this morning for their annual meeting. If company officials had their way, this meeting would not be happen. At least not as a meeting of only Duke Energy shareholders. The plan was for this to be the first annual meeting of the newly-married Duke and Progress Energy. But 2011 did not go as the companies planned. For a recap of the year, I'm joined by WFAE's Julie Rose.
JULIE: Hi Marshall. I like that marriage analogy. Duke and Progress sent the invites out last summer for a Christmas wedding. But you know that part in the ceremony where they ask if anyone has a reason why the wedding should not proceed?
JULIE: Well they haven't gotten past that part yet. And it's taking longer than they expected.
MARSHALL: Is it shareholders who object?
JULIE: Absolutely not. More than 90 percent of them voted FOR the merger last summer. Here's the pitch they got from Duke CEO Jim Rogers:
ROGERS: The new Duke Energy will be America's largest utility as measured by enterprise value, market capitalization, generation assets, customers and numerous other criteria. Together to the companies will be more efficient, more profitable and more competitive, Rogers says. All very good things for shareholders.
MARSHALL: So what's the problem?
JULIE: The merger needs approval from two regulatory agencies. On the one hand you've got the North Carolina Utilities Commission which is out to make sure retail ratepayers like you and me get a fair shake in the deal. The commission is in charge of negotiating how much of the merger costs can be passed on to customers. Duke and Progress have already worked out a preliminary deal to satisfy those demands. But then you've got the Federal Energy Regulatory Commission - FERC for short - which regulates the wholesale market. Its goal is to make sure Duke and Progress don't end up shutting out competition from other wholesalers who want to provide electricity to co-ops and cities and such. The companies have twice proposed solutions to the monopoly problem, but so far FERC has not been satisfied. Neither have some of their more outspoken wholesale customers. Here's what the mayor of New Bern - Lee Bettis - told us a few months ago.
BETTIS: Let's just put it like this. Progress energy is Godzilla. Duke Power is King Kong. They're getting married. Now they want to say if they have a baby, their baby's gonna be Bambi. It's absolutely not gonna be Bambi.
MARSHALL: And is that basically the FERC's concern as well?
JULIE: Yes. But the concessions Duke and Progress are making to please FERC will cost more than a hundred million dollars. They'd like to recover that money by raising rates. That's where state regulators object - because they say ratepayers like you and me shouldn't have to cover costs unless they directly benefit us. So it's a tough balance to strike. Rogers actually recently said it's like trying to run between raindrops. I think it's proven harder than the companies expected. Duke and Progress are still committed to getting hitched, but their original merger agreement expires in July.
MARSHALL: You mentioned rate increases - they always seem to generate controversy . . . Duke had a bruising battle on that front last year.
JULIE: Indeed. The company initially asked for an average 17 percent increase for residential customers to help recover billions it has spent over the last two years upgrading transmission lines and building new power plants. There was serious pushback - even from the state Attorney General. So Duke backed off and ended up with a 7.2 percent increase that'll take effect in July. The attorney general still thinks that's too much and has appealed it. The environmental group NC Warn this week also filed a challenge with the utilities commission claiming Duke Energy is offering unfair breaks to entice companies like Apple, Facebook and Google to the state and set up data centers that use massive amounts of electricity. NC Warn analyzed Duke's rate records and determined residential customers and small businesses are paying three times as much for electricity as those big electricity hogs. Here's Jim Warren of NC Warn.
WARREN: Duke Energy is rigging its rates against small businesses and families in the Carolinas and they're doing it to make more money.
MARSHALL: Making money is exactly what Duke's shareholders expect of the company, though, isn't it?
JULIE: It is. Which is what makes these annual meetings so interesting. On the one hand you've got shareholders who'll be inside the meeting today. Their stock price is up about 14 percent since last year's meeting. They continue to get a handsome shareholder dividend from Duke and they want the merger to happen as soon as possible so they can see all those profits and efficiencies we heard Jim Rogers talk about. Outside the meeting, environmental and social justice groups have pledged a "massive" protest against Duke's rate increases, spending on lobbyists and continued reliance on coal.
MARSHALL: Is the city concerned about how those protests might unfurl in the street outside Duke's headquarters this morning? JULIE: Enough that the city manager has invoked a special "extraordinary event" designation that gives police the power to search and detain people who come to the protest with any of a long list of prohibited items. That includes pepper spray and box cutters, but also backpacks, Sharpies and water bottles.
MARSHALL: We'll look to your report on how it goes this afternoon. Thanks Julie.
JULIE: You're welcome.