Oh, how the mighty have fallen! Two years ago, when Duke Energy merged with Progress Energy—swallowed it, actually—you'd have been hard-pressed to find a public figure brave enough to question the giant utility monopoly that bestrode North Carolina. Or who called the merger a mistake.
What could possibly be wrong with one company supplying the electricity to 95 percent of our state? One company that is both public utility and shareholder-owned: Captive customers pay the bills and the company makes all the campaign contributions it wants.
Sure, a few critics howled. But they were easily dismissed, and soon a former Duke Energy staffer named Pat McCrory was elected governor. Duke was riding high.
Then a pipe broke in Eden on Feb. 2.
And you know what came next. Coal ash poured into the Dan River from one of Duke Energy's ash pits. Old toxic holes in the ground that Duke (and Progress) should've been required to clean up long ago, except that North Carolina regulators don't tell Duke what to do, Duke tells them.
And what of the N.C. Utilities Commission, which is supposed to make sure that Duke serves the public interest?
Here's Ed Finley, appointed chairman of the commission in 2007 by Gov. Mike Easley and reappointed in 2013 by McCrory. Finley is a lawyer who previously represented utility companies. In a November 2008 conference call with Duke Energy officials and the investment analysts who followed Duke's stock, Finley explained his approach:
"[M]y legal practice for 30 some years was in representation of public utilities. And I sort of take a long view of those types of things that you can, if you're too stringent and too strict on the public utilities in the short run, you end up paying more for the cost of the product in the long run. But that's only my philosophy ... we have seven commissioners."
(Read the transcript at here.)
The NCUC, which greased that merger with nary a doubt, is not too strict.
It was a wounded Duke Energy that, on Sunday, bought full-page newspaper ads to say how sorry it is—and how it's "a privilege to serve you, our customers."
Too late. Duke's façade is shattered, and it is now revealed to be what it is, a profit-seeking corporation that answers, first and foremost, to its shareholders. And in some quarters, we're hearing the question asked: Wouldn't North Carolina be better off, and have lower electricity rates, if we allowed competition in the market and stopped protecting Duke's monopoly?
NC WARN and the John Locke Foundation, two groups vastly different in their political philosophies, have been asking that question of each other, each believing the answer to be yes.
NC WARN, based in Durham, is a progressive organization. Its director, Jim Warren, has for many years been Duke Energy's most outspoken critic for its reliance on dirty coal plants and expensive nuclear power.
The John Locke Foundation, based in Raleigh, is part of conservative businessman and state budget director Art Pope's constellation of free-market, anti-government groups. Its critique of Duke Energy was more muted—but no longer.
Competition, says Jon Sanders, Locke's director of regulatory studies, will put downward pressure on electricity prices while unlocking new technologies that can't get into the market now. Warren agrees.
Sanders had fracking in mind—he talked up a "farm to table" approach to natural gas generation that would see it piped from local sources to small-scale electric plants that Duke wouldn't own. Warren calls for a different kind of distributed generation, including small co-ops selling power from solar and wind farms and co-generation facilities.
But they do share a goal: Change the state law which grants Duke Energy a monopoly in most of North Carolina and bars "third party" sales of electricity by anyone else.
Duke would still own the transmission wires. But it would no longer be the only company generating power for sale.
The experts brought in by Locke and NC WARN talked about how other states have decentralized power generation, though the Southeast has not. Elsewhere in the country, electric rates were higher, and states let competitors in to bring rates down, they said. Here, electricity was relatively cheap until recently. In the last four years, though, Duke Energy raised its N.C. residential rates by about 30 percent, Warren said.
Why? According to Shawn LeMond, an economist and energy consultant and former Republican state representative from Mecklenburg County, the reason is simple: because it can.
Duke is projecting steady growth in power demand in North Carolina and building new plants to supply it, LeMond says. Under the utility model North Carolina uses, for every dollar Duke spends, it gets a dollar back from ratepayers plus interest and a guaranteed profit (around 10 percent).
In short, the more Duke spends, the more it makes.
Also, Duke's never had to pay for its messes—like the coal-ash pits or the radioactive wastes piling up at its nuclear plants. But those costs are coming, LeMond says. Nor does Duke have enough set aside to pay for closing (de-commissioning) its nuclear plants when their useful life is over.
But with energy efficiency coming on strong in industry and home appliances, LeMond says, power demand in North Carolina has flattened and may decline. Duke's new plants may be an expensive blunder—one that will land on its ratepayers.
At the first forum, LeMond held up his cell phone and asked us to remember what our telephones looked like before AT&T was broken up. "Let's all start from the premise that we don't know what technology will bring," he said. "But if we close the door on it, we'll become extinct."
This article appeared in print with the headline "Breaking up the Behemoth."