From a business perspective, Duke Energy’s plan to acquire Piedmont Natural Gas for $4.9 billion in cash and $1.8 billion in debt looks like a smart move.
Duke, the nation’s largest electric utility, has been pivoting away from coal-fired power plants in favor of gas-powered ones. Tighter federal regulations make coal a tougher business proposition, while fracking has helped make natural gas an attractive alternative.
In the past three years, Duke has closed half of its 14 coal-fired power plants in North Carolina. It has opened five natural gas-powered plants since 2011, and it has partnered with Piedmont Natural Gas and others to build a 550-mile, $5 billion pipeline from West Virginia to eastern North Carolina.
Duke set a record this summer for its use of natural gas, and usage nationwide is rising. So, buying out Piedmont Natural Gas makes business sense. Duke absorbs a key supplier in a sector poised to play a big role in the utility’s growth plan.
But will it be good for consumers? That remains to be seen. In the world of corporate mergers and acquisitions, what’s best for shareholders isn’t always what customers and employees want.
Ratepayers want to know if the merger will bring lower bills or higher ones. They need to know if it’s OK for a company that already dominates the regional market for one essential regulated service to now hold sway over a second need as well.
And environmental activists raise an additional concern that bears watching: Given the history of volatility in the natural gas sector, what happens to Duke and its ratepayers if the fracking boom unexpectedly goes bust?
Duke officials say gas has been so plentiful and so cheap for so long now that it’s a safe bet. And Duke wisely tempers risk with a diverse portfolio of power-generation sources, including a small but growing amount from renewable energy.
The deal must clear a federal antitrust review. Thankfully for consumers, it must also win approval by the N.C. Utilities Commission. The N.C. Public Staff, an independent agency that represents utility customers’ interests before the commission, is looking into the merger.
Chris Ayers, chief of the Public Staff, told the editorial board Monday that his agency will be sifting through the merger documents closely, trying to make sure the benefits of the deal outweigh any risks to consumers.
The Public Staff, as well as the commission, took Duke officials to task during the messy merger with Progress Energy. Regulators eventually engineered the 2012 settlement that ended former CEO Jim Rogers’ reign and cost other executives their jobs.
Such dramatic measures surely won’t be necessary again, we imagine. Nevertheless, ratepayers are depending on regulators to be just as thorough in their analysis this time around.