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N.C. environmental group sues to overturn Progress Energy-Duke merger

Published Jan. 10, 2013

A North Carolina environmental watchdog group filed an appeal Wednesday to revoke or modify the Progress Energy-Duke Energy merger, citing costly troubles with Progress' nuclear fleet in Florida.

In particular, the group, NC WARN, alleges that Duke Energy knew the broken Crystal River nuclear plant could cost more than $5 billion in repair and related costs.

Together with the ballooning cost of the proposed $24 billion Levy County nuclear plant, NC WARN says Duke's Carolina customers face higher rates to help the utility balance its books.

In addition, the nonprofit organization says Duke's plans to spend billions to upgrade nuclear plants from Progress' fleet — including hundreds of millions on the idle Crystal River plant — mean even more burden on the utility's 7 million customers.

NC WARN is asking the North Carolina Court of Appeals to review the decisions by the state's regulators to approve the merger. NC WARN said it asked North Carolina regulators to review these and other issues prior to the close of the merger on July 2, but they gave short shrift to the request.

"We are confident that the judges will agree that the merger must be either revoked or significantly altered," said Jim Warren, executive director of NC WARN, "which could lead to Duke shareholders shouldering more of the billion-dollar mistakes Duke wants to foist on families, local governments and small businesses."

In response to NC WARN's appeal, Duke issued a statement, saying the "appeal lacks merit."

"The 6-month-old merger continues to make good sense for Duke Energy's customers and the communities it serves," wrote Dave Scanzoni, a company spokesman. "Since the merger was consummated in July 2012, Duke Energy's North Carolina and South Carolina customers have been benefiting from lower power plant fuel costs and a larger, combined fleet of power plants that ensures operational efficiency."

Troubles with the Duke-Progress merger brought national attention to the deal. The utility came under fire by North Carolina regulators after a decision to fire Progress Energy CEO Bill Johnson, who had been slated to lead the combined company.

After the merger closed, Johnson held the position for less than a day before Duke's board fired him.

The North Carolina Utilities Commission summoned executives and board members for hearings and ultimately reached a settlement agreement with the utility to allow the merger to proceed. As part of the settlement, Duke CEO Jim Rogers agreed to retire by the end of 2013.

NC WARN argues that the merger will add financial burden to Duke customers throughout the utilities' six-state service area.

Warren noted in a statement about his organization's filing that the troubles at the Crystal River nuclear plant already are costing Duke's customers beyond Florida.

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He cited an article in the Dec. 30 Tampa Bay Times that showed Duke's insurance company may have to charge utilities across the nation tens of millions of dollars apiece to help pay for repairs of the Crystal River plant, if the crippled unit ever gets fixed.

"NC WARN has argued that the Florida projects will impact North Carolina customers indirectly," Warren wrote. "But last week's revelation by the Tampa Bay Times about inadequate insurance company reserves means the Crystal River fiasco could cost Duke's Carolinas customers tens of millions of dollars in direct costs if all U.S. plant owners are required to pitch in to offset the insurer's shortfall."

Sam Watson, general counsel for the North Carolina commission, said the state's regulators are not involved in appeals of their decisions. Watson said it will be up to the court to review the commission's handling of the case.

"NC WARN was a party to that case and has the right under North Carolina law to appeal," Watson said.

Ivan Penn can be reached at ipenn@tampabay.com or (727) 892-2332.


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