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Robert Trigaux

Key challenge after Duke Energy-Progress Energy merger? Managing politics of rising electric rates



jamesrogersdukeenergyap.jpgWake up and good morning. I'm not sure how often I can repeat this message but if Floridians think their electricity rates are high now, you will soon look back at these days of cheap power with great nostalgia. Jim Rogers, CEO of Duke Energy (AP photo, left) -- the North Carolina power company that is in the process of buying Progress Energy (and Progress Energy Florida) has been extraordinarily clear in speech after speech that rates are going to rise rapidly in coming years. he said just that again this week in remarks in Orlando to a gathering of power company executives sponsored by the Edison Electric Institute. Read this coverage from Platts, an industry publication that was there.

"My view of the future is you will see a steep increase in prices and that is different than what has happened in the past 50 years," Rogers said. You can hear his exact words and watch accompanying Duke Energy slides, right here.

Rogers gives some reasons for the coming price hikes. A combined Duke-Progress Energy giant (largest power company in the country) will have to retire and replace all of its aging power plants by 2050. That's a megabucks project and one that will start earlier than you think because of the time it takes to win approval and build new plants.

What's most striking about Rogers' remarks is that he spends little time talking about new energy technologies, other than becoming more energy efficient. But he spends a whole lot of time talking about the need for power companies to influence state legislatures and regulators in how to manage the process of raising the price of electricity to consumers in the coming years.

"More will need to be done in the legislatures," he says. The issue? Managing the pushback utilities are starting to see on rate hikes.

Rogers predicts, unlike most of his peers, that energy demand in the country will be flat and not grow as the economic recover slowly returns.

And he acknowledges that the effort to raise rates will overlap these tough economic times.

Give Rogers high marks for transparency. He has repeatedly given speeches saying sharply higher electric rates are coming, as reported here and here and here and here and here.

Three observations:

1. North Carolina regulators are showing some actual backbone in resisting the request for skyrocketing electric rates in that state. Contrast with the domesticated "whatever you want" machinery in Tallahassee: A legislature captive to big utility demands and happy to take their campaign contributions, and a Public Service Commission cowed by a bullying legislature to give utilities what they want.

2. Florida Gov. Rick Scott must have the world's biggest blinders on to crow that he is making Florida a business magnet by lowering taxes (slightly) and cutting red tape (slightly) at the very same time that the electricity rates businesses and consumers in Florida (at least in Progress Energy Florida territory, which is most of west-central and northern Florida) are about to escalate dramatically. Hello, Gov.? Do you think businesses contemplating a Florida relocation are stupid?

3. If Jim Rogers can't seem to say it often enough and loud enough that electricity rates are set to balloon, isn't it bizarre that Progress Energy Florida remains silent to its captive Sunshine State customers on the coming price hikes?

-- Robert Trigaux, Business Columnist, St. Petersburg Times (soon to be Tampa Bay Times)


[Last modified: Friday, November 11, 2011 7:33am]


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