Customer impact questioned as Duke Energy proposes consolidation of NC utilities

This story was updated at 7:30 p.m. to add information about South Carolina as well as more information on the rate impacts.

The proposed merger of Duke Energy Carolinas and Duke Energy Progress leaves customers with one big question: Will it lower my bill?

Duke says the consolidation will result in cost savings of more than $1 billion and as much as $3.2 billion by 2038, but how that may affect customers’ bills is complicated.

Historically, Duke Energy Progress customers have paid slightly higher rates than Duke Energy Carolinas customers, said David Neal, senior attorney at the Southern Environmental Law Center.

“How to balance that without any undue discrimination or causing harm to existing customers is going to be a challenge,” Neal said.

Dan Crawford, director of governmental relations at the North Carolina League of Conservation Voters, put it more bluntly, telling  NC Newsline in a statement:

“This merger will impact customers the same way everything Duke does impacts customers — their rates will keep going up and Duke will make billions.”

In its regulatory filing, Duke Energy said the move would optimize efficiency between the two utilities, and is needed as demand on the energy grid grows.

Kendal Bowman, North Carolina president for the two entities, said in testimony with the North Carolina Utilities Commission that the merger would allow “the combined utility to continue to deliver safe and reliable energy to our customers at a lower overall system cost.”

Duke Energy Carolinas serves western areas of the state, including Charlotte and its surrounding area, while Duke Energy Progress covers the eastern half of North Carolina, including the Raleigh region. It’s a total of about 3.8 million retail customers in North Carolina, according to Duke Energy. Both utilities also operate in neighboring South Carolina as well, serving about 855,000 retail customers there.

“They’re already part of the same company, so it seems maybe rate cases, expenditures on lawyers, and that sort of thing will go down,” Rep. Pricey Harrison (D-Guilford) said. “There are areas where I would be happy to criticize Duke, but probably not on the merger.”

But there is speculation over what a merger would actually mean.

North Carolina has a multi-year rate plan system where Duke Energy files rate plans for a three-year period. This was last done three years ago.

Following current cycles, observers expect Duke Energy Progress to file for a rate increase sometime this fall and Duke Energy Carolinas to do the same in the early part of next year.

Duke is aiming to complete the merger on Jan. 1, 2027.

“The question in our minds is, ‘what does it mean to be filing for this merger at the same time you’d be filing for new rates?'” said Sue Sturgis, research and communications manager at the Energy and Policy Institute.

Duke Energy spokesperson Bill Norton told NC Newsline the details of that are still being worked out.

Shuffling costs

But to get South Carolina regulators to agree to the merger, the utility company proposes shuffling money around between customer groups to prevent potential sticker shock to its electric customers in South Carolina’s Upstate.

Just as in eastern North Carolina, Duke’s customers in the Pee Dee pay more per megawatt than customers in the Upstate, Charlotte area and western North Carolina. Merging the companies could result in major hikes for customers in South Carolina’s northwest corner, if they’re asked to pay more for a portion of the East’s more expensive power costs.

So, rather than possibly seeing their bills go down, Duke’s wholesale customers — which include South Carolina’s electric cooperatives — will forgo $55 million annually over five years to keep Upstate bills steady. Meanwhile, North Carolina customers would give up $25 million worth of savings annually over six years, according to filings made with the two states’ utility regulators.

That means the merger itself won’t make rates go up or down, according to the company.

In a statement, Kodwo Ghartey-Tagoe, executive vice president and CEO of Duke Energy Carolinas, said no retail rates would change immediately upon the merger’s completion. If the merger is approved in 2027, Duke said it would gradually shift the two sets of rates until they are evenly matched.

Few job cuts

The company does not expect to make significant personnel cuts as a result of the merger. There are about 13,500 employees for Duke Energy based in North Carolina and 4,000 in South Carolina, according to Duke Energy.

Duke Energy previously merged with Raleigh-based Progress Energy in 2012, and maintains a corporate office in downtown Raleigh for Duke Energy Progress.

“Since our teams have largely operated as a combined organization since the 2012 merger, most personnel efficiencies have already been realized. There may be some very limited reductions in corporate-related areas, but we anticipate impacts will be managed through natural attrition and careful headcount management over time rather than anything immediate,” Norton wrote in an email.

In her testimony with the state Utilities Commission, Rachel Elliott, director of rates and regulatory planning for Duke Energy Carolinas, said the company expected about 3% of the projected savings to come from corporate administrative costs, such as having to only file one rate case, saving on legal fees and other regulatory expenses.

The merger would need to be approved by the North Carolina Utilities Commission, the Public Service Commission of South Carolina, and the Federal Energy Regulatory Commission. Any future rate changes will remain subject to regulatory approval. North and South Carolina regulators decide rate cases separately.

At least one South Carolina group — the South Carolina Policy Council, a think tank that advocates for limited government and free markets — is skeptical of the deal will benefit customers.

“They have their own reasons for the merger that are beneficial to them,” said Neil Wolin, a member of the Policy Council’s research team.

But it’s disingenuous to pitch the merger as a benefit and cost savings to customers when they won’t see any of that supposed savings in their utility bills, Wolin said.

“I don’t think South Carolinians are interested in deciphering” the benefits of rate relief amid rate hikes, Wolin continued. “They are getting their electricity bills, and they’re going up. No matter how many times (companies) say rates are going down, they are not. And that is the main issue.”