Duke Energy, Progress Energy propose settlement that, if approved by North Carolina Utilities Commission, would guarantee US$650M in customer savings, that utilities would not recover merger costs from customers
CHARLOTTE, North Carolina, and RALEIGH, North Carolina
September 2, 2011
– Duke Energy and Progress Energy today announced a settlement with the N.C. Public Staff regarding the companies' proposed merger.
The proposed settlement, if approved by the NCUC, would provide for the following:
Guaranteed customer savings – the companies will guarantee North Carolina customers benefit from their allocable share of $650 million in savings over the first five years after the merger closes (2012-2016);
Continued community support – the companies will continue their current level of community financial support of approximately $16.5 million annually for a minimum of four years after the merger closes (based on each company's average level of community support over the last 5 years – which is approximately $9.2 million for Duke Energy and approximately $7.28 million annually for Progress Energy);
Other community funding – the companies will provide $15 million for low-income household weatherization, community college programs that target technical and vocational training, or similar organizations and initiatives; and
Costs to achieve merger – direct merger-related expenses will not be recovered from customers. Recovery of employee severance costs can be requested separately.
The settlement agreement was filed today by the N.C. Public Staff, which serves as the state's chief consumer advocate on utility matters. Other parties will file testimony related to the merger application and the proposed settlement agreement by Sept. 7.
The NCUC has scheduled an evidentiary hearing on the proposed merger Sept. 20.
If the settlement is approved by the NCUC, the companies will guarantee a cumulative amount of $650 million in savings to customers in North Carolina and South Carolina in the first five years after the merger closes (2012-2016).
The savings will come through efficiencies in fuel procurement, fuel usage, fuel transportation and jointly dispatching Duke Energy Carolinas and Progress Energy Carolinas power plants to serve Carolinas' customers.
The companies also agreed to maintain their current level of community support for the next four years, two years longer than proposed in the merger agreement announced in January.
In addition, the companies will provide $15 million for low-income household weatherization, community college programs that target technical and vocational training, or similar organizations and initiatives.
"We are very pleased to have reached this proposed settlement agreement with the Public Staff," said Bill Johnson, chairman, president and CEO of Progress Energy and the named CEO and president of the merged company. "The settlement will provide constructive and tangible benefits for our customers and communities."
Although not included in the settlement agreement, the companies have also provided more clarity around their objective of maintaining a substantial Raleigh presence for the combined company.
The companies currently estimate that between 1,000 and 1,300 employees will be based in downtown Raleigh once the merger is complete, compared to approximately 2,000 today. This number could change over time based on changing business needs.
They will occupy the Progress Energy Building located on South Wilmington Street. Recently, the company signed a non-binding letter of intent to sublease the company's Two Progress Plaza facility to Red Hat.
As previously announced, corporate functions will be centralized in the company's Charlotte headquarters.
The primary functions based in Raleigh will include the North Carolina utility president as well as relevant staff to support regional assets and customers.
"We have a century-long history in Raleigh," Johnson said. "We will continue to be a driving force in Raleigh and eastern North Carolina, and we will work to make the transition as smooth as possible for our employees, our customers and our communities."
To date, the companies have made the following filings, in addition to the North Carolina filing:
Merger-related filings with the Public Service Commission of South Carolina, which has scheduled hearings for Oct. 26.
An application to approve the merger with the Kentucky Public Service Commission, which has provided conditional approval.
Joint filings with the Federal Energy Regulatory Commission and with the Nuclear Regulatory Commission (the latter related to nuclear plant license transfers).
Hart-Scott-Rodino filing with the U.S. Department of Justice and Federal Trade Commission. The waiting period under the HSR Act expired April 27, 2011.
Assignment of Authorization filings with the Federal Communications Commission which were approved July 27.
Although there are no merger-specific regulatory approvals required in Indiana, Ohio or Florida, the companies will continue to update the regulatory commissions in those states on the merger. The merger also requires modifications to several existing affiliate agreements; the companies will file those with various state commissions for approval, as applicable.
If completed, the merger will create the nation's largest electric utility, as measured by enterprise value, market capitalization, generation assets, customers and numerous other criteria. The combined company is expected to have more than 7.1 million electric customers in six states (North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky) and the largest regulated nuclear fleet in the country.
Both Progress Energy, Inc. (NYSE: PGN) and Duke Energy Corporation (NYSE: DUK) received respective shareholder approval at separate meetings Aug. 23. The companies are planning to complete the merger transaction by the end of the year.
About Duke Energy
Duke Energy is one of the largest electric power holding companies in the United States. Its regulated utility operations serve approximately 4 million customers located in five states in the Southeast and Midwest, representing a population of approximately 12 million people. Its commercial power and international business segments own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the United States. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: www.duke-energy.com.
About Progress Energy
Progress Energy (NYSE: PGN), headquartered in Raleigh, N.C., is a Fortune 500 energy company with more than 22,000 megawatts of generation capacity and approximately $10 billion in annual revenues. Progress Energy includes two major electric utilities that serve about 3.1 million customers in the Carolinas and Florida. The company has earned the Edison Electric Institute's Edison Award, the industry's highest honor, in recognition of its operational excellence, and was the first utility to receive the prestigious J.D. Power and Associates Founder's Award for customer service. The company is pursuing a balanced strategy for a secure energy future, which includes aggressive energy-efficiency programs, investments in renewable energy technologies and a state-of-the-art electricity system. Progress Energy celebrated a century of service in 2008. Visit the company's website at www.progress-energy.com.