Duke Energy on Thursday asked state and federal regulators to approve a plan to combine its two electric utilities in the Carolinas — Duke Energy Carolinas and Duke Energy Progress — a move the company said would produce $3.2 billion in cost savings through 2038.
“The energy landscape is evolving rapidly — customer demand is growing, grid operations are becoming more complex, and the orderly transition towards a diversified set of energy resources requires maximizing efficiencies in planning and operation across the entire Carolinas footprint,” Kendal Bowman, North Carolina president for DEC and DEP, said in testimony filed with the North Carolina Utilities Commission.
The merger must be approved by the NCUC, the Public Service Commission of South Carolina and the Federal Energy Regulatory Commission.
Duke aims to complete the merger on Jan. 1, 2027, with DEC being the remaining utility. DEC and DEP retail rates would be blended over time after the merger is completed, the Charlotte, North Carolina-based utility company said.
Since Duke Energy and Progress Energy merged in 2012, they have dispatched their power plants as if they were a single utility, which, combined with fuel savings and other efficiencies, has saved about $1 billion, according to the company. “But regulations limit further coordination between the two utilities; only a full combination can unlock additional savings,” Duke said.
Combining DEC and DEP enables more efficient resource planning, execution and operations, more balanced investments across a broader customer base, simplified regulatory processes and uniform service offerings, Bowman said.
Those factors could produce about $3.2 billion in cost savings by 2038, Rachel Elliott, director of rates and regulatory planning for DEC, said in testimony filed at the NCUC. About 97% of the estimated cost savings come from the combined utility’s ability to plan, execute and run its system more efficiently, Elliott said. The remaining savings come from corporate administrative savings, she said.
A single utility will be able to more effectively plan and operate new generation and transmission in the Carolinas, partly by locating assets where they make the most sense across a broader footprint, Duke said.
Also, combining the utilities will bolster grid reliability by improving the balancing of distributed generation resources while reducing the need to restrict solar production due to oversupply, grid congestion or lack of demand, Duke said.
Duke expects the merger will cost about $143 million, according to Bowman.
The merger would change cost allocations among customers, so that its costs would outweigh the near-term benefits for Duke’s retail customers in South Carolina, according to Bowman. As a result, Duke proposed a “Share the Benefits” plan that calls for North Carolina retail customers and Duke’s wholesale customers to temporarily contribute a portion of their savings to South Carolina retail customers, she said.
Duke’s wholesale customers have agreed to contribute $55 million a year over five years to South Carolina retail customers and North Carolina retail customers would contribute $25 million annually over six years, Bowman said. Without the contributions, South Carolina regulators would probably reject the merger, she said.
DEC owns 20,800 MW and has 2.9 million customers in North Carolina and South Carolina and DEP owns 13,800 MW and has 1.8 million customers in the two states, according to Duke.
