On Monday, Florida energy regulators met with the CEO of Duke Energy, which merged with Progress Energy last month to become the largest utility company in America. The board asked for reassurance that the controversial merger and a disabled nuclear plant won’t hurt the company’s Florida customers.
The Duke-Progress merger had a rocky start, with the resignation of former Progress Energy CEO, Bill Johnson. Two Progress board members, who had believed he was going to lead the combined company, were so upset that they also stepped down.
Jim Rogers, a former consumer advocate and lawyer for the federal Energy Regulatory Commission, stepped in to lead Duke last month. On Monday, Florida energy regulators met with Rogers for the first time. Florida Public Service Commissioner Julie Brown said the board had gotten much of its information about the merger from news reports and welcomed the chance to pose questions to Rogers in person.
Brown said, “We’re not here to tell you how to run your company, but we are here to know how you run your company.”
Commissioners said they were concerned that a transition period following the merger could adversely affect service. But Rogers, who has overseen three company mergers in his career, said the combined utility provider will serve customers better than before.
“When you bring two companies together, you implement the best practices from each and become more efficient," he said.
In fact, he expects rates for the company’s 1.6 million Florida customers, in more than half of the counties in the state, to decrease in the long-term. And he assured the utility board that rate payers would not bear the cost of the company’s $10 million severance package for the former Progress Energy CEO.
But, regulators still have concerns about ongoing negotiations and the potential costs of a nuclear plant in Crystal River that was disabled during repairs in 2009. Under a settlement Progress had reached with consumer advocates earlier this year, the company has until the end of the year to decide whether to go ahead with repairs or to shut the plant forever. Rogers says, it’s taking its time.
“Whatever decision that we make, we will make it in the best interest of the customers in Florida," he said.
He said engineers are studying the damage to assess the cost of repairing the plant. The company is also in mediation with its insurer to try and cover the repairs, which could total more than $1 billion. The company would also have to get approval from the federal nuclear regulator to extend the plant’s license.
“And the right answer is the one that leads to the lowest cost impact on consumers on a risk-adjusted basis," he said.
If the insurer denies the company’s claim, and it still decides to go ahead with repairs, that cost could fall on consumers. Rogers says this is highly unlikely, and, in his mind, it’s not a question of whether they’ll cover the claim, but rather how much of it they’ll cover.
Either way, if repairs aren’t started by the end of the year, the company has agreed to refund customers about $300 million.