The proposed merger between Duke Energy and Progress Energy just got more interesting.
State regulators who will begin public hearings on the merger tomorrow morning said today they will consider arguments about the broader economic impacts of the merger, including possible remedies for the hundreds of job losses the merger will cause.
The state's two biggest electric companies had argued such issues were out of bounds in a merger proceeding and should not be allowed. The utilities are planning to combine into the nation's biggest electric utility, with 7.1 million customers in six states.
Critics countered that it's essential to consider the consequences of the 2,000 job cuts the companies plan as part of their consolidation. North Carolina's jobless rate is above the national average and the economy is still sputtering more than a year after the recession ended.
"The commission is taking a broad perspective in assessing the costs and benefits of the proposed merger," said Progress spokesman Mike Hughes. "That is certainly the commission’s prerogative."
The merger hearings are set to get underway tomorrow morning in Raleigh. The proceeding will take place just days after the Employment Security Commission said last week the state's jobless rate in August was 10.4 percent. That's the fourth consecutive monthly increase in the state's jobless rate and the highest unemployment level in more than a year.
State law requires the N.C. Utilities Commission to review utility mergers by making sure the public benefits outweigh the costs and risks.
The merger also requires approval from the Federal Energy Regulatory Commission and S.C. Public Service Commission, but the review in North Carolina is expected to be the most thorough, since bouth companies are based in this state and the economic aftereffects of the merger will play out here for decades.
The merger will mean the loss of a Fortune 500 corporate headquarters in Raleigh after the company is consolidated in Charlotte. Progress said it will eliminate 700 to 1,000 jobs at its Raleigh headquarters, eliminating up to half its downtown workforce.
Still, Charlotte-based Duke and Raleigh-based Progress had urged the commissioners to restrict the scope of the hearings to consider only the merger's impact on customer rates, not other consequences.
A number of nonprofit advocacy organizations contend the merger's sweeping job cuts will require substantial compensation to offset the damage to the state's depressed economy. The critics are suggesting an increase in green energy and conservation programs, and one organization wants the merged utility to contribute $270 million to low-income housing assistance programs for weatherization and other services.
The companies have guaranteed the merger will benefit customers to the effect of $650 million over five years, the net savings from combined fuel and related operations.
Duke and Progress executives have said since announcing the planned merger in January that it will be a good deal for customers because it will reduce the impact of inevitable rate increases.
"We believe the benefits of the merger are compelling for customers," Hughes said. "The merged company will be better positioned than the companies individually to invest billions of dollars needed to build new plants and power systems in the coming years while ensuring reliability and lower overall cost for customers."
But the merger will also have substantial costs. Duke and Progress plan to spend hundreds of millions of dollars on severance payments to employees who are laid off and those who take voluntary buyouts. The companies plan to ask the commission to make customers pay for those payments in their monthly utility bills. The state's consumer advocate, the Public Staff, has vowed to fight that request whenever it's made.