Say what you want about Duke Energy and the often-injudicious CEO James Rogers, but at least he is focused on his company’s profitability and the interests of shareholders.
Last week he composed an op-ed for The News & Observer of Raleigh in which he praised Democrat Sen. Kay Hagan and Republican Sen. John McCain for their introduction of the Foreign Earnings Reinvestment Act. The bill would give American companies a “holiday” from the 35 percent U.S. corporate income tax, enabling businesses to – as James Valvo of Americans for Prosperity explained – invest in capital and R&D, hire and train employees, and pay dividends to shareholders.
“Duke Energy alone has $1.2 billion held hostage overseas by a tax system that penalizes U.S. businesses that want to bring their foreign earnings to America to create jobs,” Rogers wrote. “With the right changes to our tax laws, we can bring that money home to support and accelerate our capital program investments in smart grid technology, retire and replace older coal plants, and build natural gas and renewable generation.”
If only it was a matter of allowing Duke to bring their money home for such “investments.” The other side of Rogers’s strategy is to hunt down every means possible to game government domestic policy in favor of Duke’s energy initiatives. Rogers could easily advocate and lobby for the expansion, and protection from excessive regulation, of coal, nuclear and natural gas production and generation – the most affordable, efficient sources of electricity known. And that would still greatly benefit Duke Power. But rather than act in the interests of his customers out of concern for their ability to afford their power bills, or promote sources of power that are dependable, Rogers emphasizes costly regulatory schemes that prop up so-called “renewables” and redound to the benefit of the company.
As has been well documented, Rogers has long been an advocate for a federal cap-and-trade system for carbon emissions, but only if the scheme gave Duke Energy a strategic advantage over its competitors in the wholesale electricity market. As the Wall Street Journal’s Holman Jenkins wrote nearly a year ago, “No executive has lobbied as noisily or consistently for a national price on carbon output.”
That effort has fallen short for now, but Rogers has continued to seek ways to play the carbon reduction agenda into profit for Duke. As was reported in August by NLPC, Duke has been on a wind and solar farm-buying and building spree in order to: capture grants from the Recovery Act; capitalize on states’ incentives and tax credits; collect Department of Energy research and development grants and contracts; and accelerate depreciation on the facilities so as to shield more of its income from taxation. As Glenn Schleede – a former Reagan Administration and Atomic Energy Commission official – explained, all the tax credits transfer “hundreds of millions of dollars annually from the pockets of ordinary taxpayers and electric customers to a few large corporations that own wind farms….”
In case there is any doubt that is what Duke’s passion for “renewables” is about, energy expert Robert Bryce (Gusher of Lies and Power Hungry) cleared it up in his National Review piece published last week:
A few months ago, I ran into Jim Rogers, the CEO of Duke Energy. I asked him why Duke — which has about 14,000 megawatts of coal-fired generation capacity — was investing in wind energy projects. The answer, said Rogers forthrightly, was simple: The subsidies available for wind projects allow Duke to earn returns on equity of 17 to 22 percent.
In other words, for all of the bragging by the wind-industry proponents about the rapid growth in wind-generation capacity, the main reason that capacity is growing is that companies such as GE and Duke are able to goose their profits by putting up turbines so they can collect subsidies from taxpayers.
That 17-22 percent looks extremely attractive when compared to what utilities are usually allowed to earn on state-regulated retail electricity, which is approximately half what they earn on wholesale electricity sales. So it shouldn’t surprise that Duke invests heavily both in the lobbying that creates the high-subsidy/tax credit atmosphere, and then once the goodies are in place, then building and buying up all the facilities it can that will enable the company to take advantage of all the government giveaways.
Unfortunately when you have regulated monopolies (utilities) operating in conjunction with government overseers (the Federal Energy Regulatory Commission and state utilities commissions) to implement policies dictated by bureaucrats and politicians, the ratepayers are the ones who get screwed. Thanks to the folly of state renewable energy mandates, and the associated demands by environmental extremists to shut down coal-fired power plants and force excessive emissions controls, Duke Energy now seeks a 20 percent rate increase for most of its North Carolina customers. That scenario is being replicated all over the country, with double-digit percentage increases in electricity rates sought by utilities in many other states.
And then there is the FERC-delayed Duke merger with Progress Energy, which would create the largest investor-owned utility in the nation and – as top executives claim – make the “new” Duke Energy even more capable of handling capital investments in new power generation facilities. But FERC has ruled that the merger plans would make the monopolies too monopolized – if that makes any sense – and create “an adverse effect on competition.” So the feds recommended that Duke sell some power plants, transmission lines or other assets, and then come back to get full approval for the merger. The company has offered to sell a fixed amount of megawatts, wholesale, at a fixed discounted rate in certain North Carolina territories with hope that FERC will endorse the plan.
Regardless of what happens, expect the pursuit of inefficient (but very profitable – thanks taxpayers!) renewable energy capital “investments” to continue, and even more so if Jim Rogers is allowed to repatriate some of Duke’s foreign earnings via a corporate tax holiday.
Paul Chesser is an associate fellow for the National Legal and Policy Center and is executive director of American Tradition Institute.