Deals show Duke and Progress cut breaks for favored customers
Aug 25, 2012 (The News & Observer (Menafn - Raleigh - McClatchy-Tribune Information Services via COMTEX) --Progress Energy and Duke Energy offered their big-ticket electricity customers substantial sweeteners in exchange for promises not to fight their utility merger, ranging from potential rate cuts and special discounts to lump sum payments.
The terms of those secret deals were made public Friday in response to a request by the N.C. Waste Awareness and Reduction Network, a Durham nonprofit, and a media coalition that included The News & Observer, to unseal the documents that the power companies and their large customers had fought to keep confidential.
The N.C. Utilities Commission earlier this month required the release of the 17 private settlements that Raleigh-based Progress and Charlotte-based Duke signed with industrial power users, rural electric cooperatives and municipal power agencies. The co-ops and municipalities co-own power plants and buy power from electric utilities and resell it to homeowners and businesses in their service areas.
The commission said that trade secrets contained in those agreements could remain under seal. But the blacked-out sections, relating to wholesale power pricing and strategy, constitute just a fraction of the 200-plus pages of contracts disclosed Friday.
The secret deals were accessible to utilities commissioners as well as lawyers and others involved in the Progress-Duke merger proceedings as long as they signed non-disclosure agreements.
The settlements show that large customers won concessions from Progress and Duke early on, even as company executives continued to insist for months they did not plan to offer similar benefits to their residential and small business customers.
They also show that industrial customers were able to negotiate a 6 percent rate cut even as Progress and Duke officials warned they would seek rate increases this year for households and businesses.
Duke did ask the Utilities Commission recently for the same rate cut for manufacturers and other industrial plants, but then withdrew the request. The company has not decided if it will try again, said Duke spokesman Tom Williams.
"We negotiated for them to try to get a rate cut," said Ralph McDonald, a lawyer who represents the industrial power users. "The basic reason we negotiate what we do is for job retention."
A major issue was the severance payments, estimated to come to a quarter of a billion dollars, that Progress and Duke will make to employees who take buyouts or are laid off as a result of the merger, which was completed July 2.
The large customers got guarantees they would not have to pay those merger-related costs, winning assurances nearly a year before Progress and Duke relented and cut a similar deal in May for small customers with the state's Public Staff consumer advocacy agency.
"In the end we got as much or more than they did," said Public Staff director Robert Gruber.
Gruber and McDonald noted that comparing settlements can be misleading, because wholesale customers and large industrial users pay different rates than households and small businesses.
Some of the negotiated terms had to do with energy capacity payments and other complex accounting calculations.
The terms for the rural co-ops and towns include guarantees that they won't have to pay merger-related costs for as long as a decade, whereas regular customers got a protection of five years, after which time the utilities can charge for transmission upgrades if the Utilities Commission agrees.
And they include payments as small as 5,000 to several towns, and as large as 375,000 to EnergyUnited Electric Membership Corp., a co-op in Statesville that has customers in central and western North Carolina. These payment are intended to cover any miscellaneous merger-related costs the confidential deals inadvertently overlooked.
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