South Carolina regulators gave their initial approval for a merger between Duke Energy and Progress Energy to create the nation’s largest utility company.
The Office of Regulatory Staff entered into a Settlement Agreement Tuesday, saying the two companies have agreed to several conditions under the deal. That includes a guarantee that customers would see more than $650 million in cost savings.
“Instead of just asserting that there will be those savings, they are guaranteeing those savings for the customers of South and North Carolina,” ORS Executive Director C. Dukes Scott said, “We think it’s a very good thing and probably the most significant part of the agreement as far as dollars are concerned.”
ORS is a state agency tasked with representing the public’s interests in dealing with power utilities. It does not usually have the final say in energy issues. That normally falls to the state Public Service Commission. However, a loophole in state law does not give the PSC authority to act on mergers when it involves holding companies (as it does in this case).
ORS asked to intervene in a North Carolina hearing on the matter (North Carolina’s public service commission does have the power to approve the merger) so they could become a “party of record.”
Duke has 660,000 customers in South Carolina, Progress: 175,000. Progress Energy spokesman Mike Hughes said the $650 million in savings would come from combining the two companies’ facilities and supply lines.
“We expect it to be able to save customers significant money through the joint purchases of fuel and jointly running our power plants as essentially a single fleet, instead of two fleets in the Carolinas,” Hughes said.
Hughes said the two utilities hope to have full approval by the end of the year. While they will be considered a single company, the two branches will still operate independently for the next few years. Hughes said that is due to the complications of different rates between the two utilities.
The South Carolina Public Service Commission still has to approve any changes in how the new company operates, even though it sat out the actual merger. Those changes will be discussed at a hearing on October 26.
Scott said that presents a challenge for regulators, “We don’t even know when they’re going to merge. We know they probably intend to merge at some point in the future, but it could be years before that happens,” he said, referring to next month’s hearing, “Certainly things could change, so how do you give approval now for something you don’t even know is going to happen?”
Also under the settlement, Duke and Progress agreed South Carolina customer rates would not pay for a new nuclear reactor in Florida or coal-powered plant work in Indiana. The companies would also contribute a total of $3.75 million for workforce development and low-income energy assistance in the first year after their merger.