The chief executives of Duke Energy and Progress Energy said this afternoon their companies plan to seek rate increases soon to meet a deadline to recover severance payments that will be paid to employees who lose their jobs as a result of the utilities' merger.
Severance costs remain the single biggest unresolved issue related to the Duke-Progress merger, which was announced in January and expected to close before the end of the year.
It's not clear how much the severance will cost customers in their monthly bills, but the electric utilities could end up paying out several hundred million dollars. The companies expect to shed 2,000 positions over three years, at least some of them from layoffs and voluntary buyouts.
Duke CEO Jim Rogers and Progress CEO Bill Johnson outlined their strategy during hearings in Raleigh before the N.C. Utilities Commission, which is reviewing the merger. The commission is expected to approve the merger, but could impose conditions and terms to guarantee more public benefits.
The state's consumer advocate, the Public Staff, has already vowed to oppose a request to make North Carolina households and businesses pay the severance costs. Public Staff Director Robert Gruber said the companies and their shareholders should eat the merger costs, not pass them on to customers.
Duke has asked for a 15 percent increase earlier this year and plans to make another request before the end of 2013. Progress expects to make a request next year. Rate requests must be approved by the utilities commission.
The executives said making customers pay for the severance is justified because customers are the ones who will ultimately benefit from the merger.
"The severance cost is the cost I would describe to achieve the savings," Rogers told the commission. "In the longer term, those savings will benefit the customers."
The seven-member commission spent an entire day hearing testimony in the first day of public hearings Tuesday. The commissioners heard from both executives, from more than two dozen residents and from lawyers.
Rogers and Johnson warned that utility rates are going to increase as their companies embark on a multibillion dollar phase of power plant construction and other costly upgrades, including compliance with stricter environmental rules.
Johnson, who will lead the combined company after the merger, said the $26 billion deal "would help us maintain lower rates than would otherwise be possible."
The companies have agreed to pass on $650 million in fuel and related savings over five years to their customers. And they said they would contribute $15 million to public benefit funds to aid low-income residents.
Advocacy groups are asking the commission to make the companies contribute more money. N.C. Waste Awareness and Reduction Network, based in Durham, wants the companies to chip in $270 million.
Alfred Ripley, a lawyer for the N.C. Justice Center, said during a break in that contributions for low-income residents should be indexed to executive salaries at both companies.
"I would like to see them asked why they're paid so much," Ripley said. "Why do you think you need $6 million a year? Would you leave if you were only paid $3 million?"
John Murawski has been a full-time newspaper reporter since 1991, with stints at Legal Times and The Chronicle of Philanthropy (both in Washington, DC), The Philadelphia Inquirer and The Palm Beach Post (in South Florida) before arriving at the N&O in December 2004. At the N&O he covers energy (nuclear, coal, renewable, efficiency), utilities (electric, natural gas, telephone) and telecommunications. His beat includes such publicly traded companies as Progress Energy, Duke Energy, PSNC Energy, Piedmont Natural Gas, PowerSecure International, Tekelec, Cisco Systems, AT&T, among others. You can reach him at 919-829-8932 or 
Comments
Is this a joke?
Tue, 09/20/2011 - 22:49 — brjohaThey want a rate increase to cover their severance costs? WTF?!
Pipe down, proles
Tue, 09/20/2011 - 22:11 — Mozartean"I would like to see them asked why they're paid so much," Ripley said. "Why do you think you need $6 million a year? Would you leave if you were only paid $3 million?"
Yes, they would.
Duke & Progress merger - rate hike warning
Tue, 09/20/2011 - 21:53 — LightRaspBuy shares in the company and attend meetings. Organize your neighbors to protest unwarranted profiterring. Demand accountibility from CEO's to produce power at the lowest cost to consumers and accept nothing less than what you ask for.
If you feel they took away your rights - take them back. We live in America and cannot afford to pay for waste and mismanagement on such a grand scale.
When the merger is complete and new facilities are running, we as consumers will see a small fraction of the returns.
Believe me when I tell you that Mr.Rogers and Mr. Johnson will retire with millions of our hard earned dollars in their pockets, don;t let them take it out of yours!
LR
say what?
Tue, 09/20/2011 - 21:25 — JustAGuyInNC"The excutives said making customers pay for the severance is justified because customers are the ones who will ultimately benefit from the merger."
Gotta love executive speak. So...they are seeking a 15% increase in part to offset severance payments, followed by another increase in ~2yrs. All that being said, it's the customers who are supposed to "benefit." ...and how's that? In my book, a benefit is one in which I would receive better or cheaper service. Cheaper certainly isn't in line. How is it getting better?
Oh this is RICH! How much are the CEOs contributing?
Tue, 09/20/2011 - 21:15 — lrlrlrThe CEO's who made this decision - how much will it affect them?
Have You Lost Your Collective Minds?????
Tue, 09/20/2011 - 21:04 — thebuckstopshereYou are asking for a rate increase to cover the cost of severance payments? The only justification for layoffs in the first place is to achieve efficiencies and reduce costs. If anything, you should propose a temporary rate increase to fund fair severance for those affected, followed by a scheduled rate reduction to refund the achieved savings to consumers.
Bend over consumers
Tue, 09/20/2011 - 20:54 — Patriot45So these two monopolies merge to improve efficiency, productivity and to cut costs.
Why would they need a rate increase???
Are you freakin kidding me??????
Tue, 09/20/2011 - 20:34 — VillageMentalitySo let me get this straight - you want to increase OUR families' utility rates to offset severence pay of laid off workers?
My God does anyone see the wrong here?
It's not MY family's problem you are laying off people. YOU and your BOARD/STOCKHOLDERS are responsible for this. YOU pay for it with your bonuses, dividends and profits. It's called business.
This is an example of all that is wrong with a capitalist society. Business greed at the expense of our community's citizenry.
This deal needs to be stopped.
Red Flag
Tue, 09/20/2011 - 20:30 — InspectorPittRate increase will be sought to pay severance despite the fact over the long haul the company will have a savings?
This is the first red flag and a good reason not to approve the merger. What we need in electric rates is competition.
So...
Tue, 09/20/2011 - 20:14 — Bob_SconceWe "save" in the merger by having our rates increase? Screwy. I have an idea: how about they DON'T lay off the workers and keep our rates where they are.
Is our Utilities Commission earning its keep?
Tue, 09/20/2011 - 19:53 — ahmbdmOur taxpayer-funded Utilities Commission must man-up and take charge here...the underemployed and unemployed taxpayers among us are still expected to pay their power bills or have their services cut off...let justice be served this time!
Why in the F>>>>> should
Tue, 09/20/2011 - 19:47 — JoeTarheelWhy in the F>>>>> should this merger be approved other than it pacifies the egos of Rogers and the insecure Napoleon complex town called "charlotte, usa", and a bunch of out of state investors?
The Utilities Commission's sole responsiblity is to assess whether "more good than harm' would come from such a merger.
1) Major job losses in Raleigh
2) Loss of a Fortune 500 company in NC
3) Rate increases for consumers immediately to pay for the people that get fired? WTF
Where exactly are the benefits to North Carolina?
Rate Increases
Tue, 09/20/2011 - 18:46 — MagLarRGCOf course there will be rate increases. Why else would the companies merge to form a monopoly.
Monopolies charge as they wish. All this posturing is just smoke and mirrors. It is all a done deal.
It is all about the stockholders.
MERGERS are supposed to reduce costs
Tue, 09/20/2011 - 17:59 — Truth_ConveyorIf Duke and Progress Energy want to merge to raise costs for the consumer, then why was this merger approved? The merger should only have been approved if it would reduce costs for the customers. Let the CEOs and the gazillion VP's take some pay cuts like the rest of us, and stop trying to soak us for extra bucks to pay for their luxury lifestyles.