Could Mister Rogers’ neighborhood be relocated to another state?

by Tom Campbell

Duke Energy’s CEO Jim Rogers issued a veiled threat to the NC Utilities Commission: if they don’t approve the 7.2 percent rate increase his company requested Duke could move their corporate headquarters to another state.

Isn’t this the same Duke Energy that lobbied to convince us their takeover of Progress Energy would result in a more efficient operation, benefiting the company and customers alike? While the exact savings have been kept confidential reports indicated savings from the merger could be as great as 600 million dollars over a ten-year period. We were told bigger would be better.

All the pre-merger discussion touted Progress CEO Bill Johnson as the leader of the new company, but backroom discussions taking place days before the merger led to Johnson being fired within hours after the deal was complete, taking with him a 44 million dollar golden parachute. Hindsight suggests the NC Utilities Commission should have done a more thorough job prior to approval, but once consummated, there was little the commission could do but feel betrayed, as did much of North Carolina.

Regulated utilities are essentially monopolies, given a protected service area, understanding that building facilities, generating power and transmitting power to customers is a costly proposition. We require these companies to provide efficient and economical service to every customer. The North Carolina Utilities Commission, remnants of our oldest regulatory body originally called the NC Railroad Commission, approves rates and is charged with regulating utility companies for the best interest of the companies and the public alike. Public utilities are and should be guaranteed a realistic rate of return in exchange, with rate increases justified based on costs of construction, fuel cost increases and other proven costs. To ensure the public is well represented and served we created the Public Staff.

In July 2011, Duke applied to the Utilities Commission for a 15 percent rate hike. We aren’t privy to those discussions but the Public Staff obviously objected to the size of the increase, subsequently giving its blessing on a 7.2 percent hike. Why was the Public Staff the group that presumably struck the deal instead of the Utilities Commission? If the Public Staff is going to negotiate rates why do we need seven commissioners? Truthfully, we don’t need seven and hope our new governor will economize and return to the traditional five who served prior to the energy crisis in the 1970’s.

Attorney General Roy Cooper is protesting the increase to the NC Supreme Court, based on the realization that the Commission did not properly do its job analyzing the impact on consumers. Cooper suggests the commission focused more on the company’s credit rating and impact on investors than on the impact to customers, allowing Duke a 10.5 percent potential rate of return, a healthy margin in this environment. Duke has already signaled it intends to seek another rate increase next year.

We clearly need better oversight. The utilities industry already plays too great a role in naming commissioners, the company board needs to assert itself more and the commission must be more proactive. The shotgun marriage between Duke and Progress turned sour before the honeymoon began and Rogers’ threat isn’t helping restore luster to what was once a great company.