Weekly Briefing

Left behind yet again

The Duke-Progress merger ignores low-income consumers

There are a lot of very good reasons to oppose the proposed merger ofNorth Carolina’s two regulated electricity giants, Duke Energy and Progress Energy.

As speaker after speaker told the North Carolina Utilities Commission at a public hearing on Tuesday (you can watch a WRAL.com video by clicking here):

  • The companies have done precious and dangerously little to promote conservation or the development of renewable energy.
  • Both plan to develop lots more, environmentally destructive coal and nuclear-fueled power.
  • Both continue to spend outrageous sums on executive compensation and the purchase of political influence at the same moment that rates to average customers remain burdensome.
  • Duke, in particular, has a long record of questionable, even abusive, practices in other states.
  • Having only two giant monopolies is already bad enough; having a single statewide mega-company will be even worse.
  • The merger will cause the loss of 2,000 or more jobs across the new combined company.
  • To make matters even worse, the process for reviewing the companies’ proposed merger (with only one public hearing on a Tuesday morning in the state capital) is turning out to be almost laughably inadequate.

Ignoring the poor

If, however, there’s a single most egregious and overlooked shortcoming in the merger proposal, it might well be this: At a time in which millions of North Carolinians live in or near poverty and still spend disproportionate amounts of their inadequate incomes on inefficient appliances in poorly weatherized homes, neither company (nor the greatly expanded Duke that would result from a merger) has any plans to implement any kind of comprehensive plan to do anything about it.

Consider the following rather startling facts – many of which were offered by attorney Al Ripley of the North Carolina Justice Center during his testimony Tuesday:

The official government poverty level for a family of four is $22,050 per year. That’s $424 a week for four people to eat, pay rent, get to and from school and work, pay taxes and insurance, buy clothes and, in many instances, pay for utilities.

Think about that number and imagine yourself trying to pull it off week after week without any kind of cushion or safety net.

The latest census data show that of the 9.2 million people in North Carolina, 1.6 million live at or below that level. That’s 17.2% of our population. Millions more live on less than what constitutes a “living income.”

Now, consider the matter of electric bills.

Though electricity is sometimes included in the rent people pay, for a huge number of lower income people it is not. These people must find a way to pay their electric bill (something that is as clearly just as necessary to modern life as water) every month. Miss a payment and you can quickly find yourself facing a shut-off order. Unlike a lot of states, North Carolinadoes not prohibit shut-offs for people behind on their payments unless the customer is elderly or disabled (and then only during winter months). Private charitable funds for utility assistance are few and far between.

This state of affairs is, of course, compounded by the fact that poor people generally live in the oldest, least-well maintained housing with the oldest, least efficient appliances. As Ripley told the Commission during his testimony:

“New census data show that low-income households in North Carolina – where the annual income is at or below 125% of the federal poverty limit, which is about $27,600 for a family of four – are more likely to pay higher electrical bills than higher income households. This is indicative of the poor quality of the structures these families live in both in owner occupied and rental units. It is also indicative of the poor quality of appliances in these homes.”

In other words, it’s a worst of all worlds situation: the people with the least ability to pay are often those with the highest bills. In many parts of the state where people must heat with electricity, consumers (especially fixed-income seniors) can easily find themselves paying huge chunks of their income (as much as 20 or 30% or more) each month in winter. Not only does this hurt people in need, it drives up demand and prices generally and contributes to pollution and climate change.

A tepid response

So what can be done to address this situation?

Obviously, options are limited. Budgets for public and private assistance are stretched thinner than ever. One thing, however, that clearly leaps out is the practice applied in many other states of requiring public utilities – the giant, regulated monopolies like Duke/Progress whose profits and territories are guaranteed by state law – to be a meaningful part of the solution.

As Al Ripley noted, there are models in other states to establish large, well-funded, utility-underwritten initiatives to weatherize many thousands of homes and modernize appliances. Other states have aggressive and innovative programs to promote other good conservation practices and even to construct low-income housing that makes use of solar power and other renewable resources. Still others have enacted so-called “percentage of income plans” and expanded shut-off protections that insulate very poor consumers from the debilitating bills and forced shut-offs.

If implemented on a large scale in North Carolina, such programs could take an important bite out of poverty in this state and help rein in explosive growth in the state’s carbon footprint.

Unfortunately, at this point, it appears that all the two monopolies (combined assets – $90 billion) are proposing as they attempt to convince the state Utilities Commission that the merger will be good for North Carolina, is a one-time, $15 million contribution to weatherization in the year following the merger.

In other words, that’s a one-time allocation just in excess of the combined annual compensation of the CEO’s for the two companies, Jim Rogers and Bill Johnson. It’s clearly less than they would spend on advertising and sponsoring sporting events and slapping their name on entertainment venues.

At an average weatherization cost of $5,200 per home, that’s enough to handle just under 2,900 out of the roughly one-million homes in this state that could qualify for weatherization assistance.

In other words, all the state will need after that is 300 or so similar contributions to finish the job!  Frankly, you’d think Rogers, Johnson and their two companies would be embarrassed.

Going forward

No one expects Duke, Progress or a new combined statewide monopoly to solve all of North Carolina’s energy and poverty woes. The problems have been long in the making and will not be addressed overnight. Still, the notion that North Carolina might allow such a huge and unprecedented event as a Duke-Progress merger to take place without requiring more of a regulated monopoly that exists to serve the public interest than a token, one-time contribution (say, ten to 20 times more) is shocking.

Let’s fervently hope that the Utilities Commission does the right thing and demands much, much more.

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