Duke wary of California power woes - Priory likens state's situation to Third World
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Published Friday, April 27, 2001
Even though Duke Energy Corp. is building one of power-starved California's biggest power plants, top executive Rick Priory said the company would hesitate to build more California plants because the state's energy economy resembles that of the Third World.
"It's no different than if it was Ecuador or Peru, and we had investments to make in those places," said Duke's chairman, president and chief executive officer, after the company's annual meeting Thursday.
"Any such investment would be subject to very careful scrutiny from our board of directors."
Duke supplies about 5percent of California's power. It is spending $500 million to modernize its Moss Landing plant south of San Jose, which is expected to provide 30 percent of California's new generation in 2002.
Priory said power investment in California involves "some of the same questions you might have in the Third World," including continual downgrades in state agency credit ratings, questions about whether power buyers are credit-worthy and a struggle between three companies for control of the state's transmission lines.
On Thursday, California Assemblyman Dennis Cardoza, D-Merced, proposed jailing individuals from companies that manipulate the energy market by withholding power.
"This Third World country just gave Duke a 374 percent profit increase (in California) to $744 million in 2000," said Cardoza spokesman Doug White. "I don't know many third-world economies that produce that kind of profits.
"All our bill says is that if you do the right thing, you can keep making profits, but if you're a bad actor, manipulating the market on the backs of Californians, you have to worry about going to jail," he said.
Duke spokesman Tom Williams said the company is running its California plants at peak capacity and has never withheld power. Spokesman Randy Wheeless said the $744 million profit figure is inaccurate: earnings before interest and taxes at Duke Energy North America, the principal Duke business operating in California, totaled $528 million in 2000.
Duke and other power producers have been intensely criticized about profiteering from California politicians, including Gov. Gray Davis, as the state's effort to partially deregulate spawned power shortages.
Priory said his remarks were not a threat to reduce Duke's commitment to California, but simply "an indicator of the rigor we'd have to go through with our board."
Two measures could improve California's picture, Priory said. A consumer price increase would cut demand, and the state could encourage new supply by cutting delays in plant construction.
"You don't have to disregard the environment," he said. "You just have to run a little faster."
Duke's annual meeting Thursday celebrated the recent performance of the most profitable U.S. electric company. Duke has benefited from rising energy demand and rapid growth in its unregulated businesses, which include international operations and construction of gas-fired plants that sell power wholesale to utilities.
Duke shares closed Thursday at $47.48 up $1.70, after reaching an all-time high of $47.57, adjusting for stock splits, during the day. The stock is up nearly 12 percent in 2001, after rising 70percent in 2000.
Priory recalled that at last year's annual meeting, he joked about changing the company's name to "Duke Energy.com" to benefit from the market's obsession with the Internet.
"A welcome sense of market sobriety has set in, and I'm glad no one took my suggestion seriously," he said. "In fact, if the current market trend continues, we may begin to see Internet companies adding `dot energy' to their names."
Meanwhile, shareholders rejected two shareholder-generated proposals. A proposal to eliminate corporate political contributions got 4.38percent of the votes, while a proposal that would mandate Duke to replace 1 percent of system capacity with alternative energy sources each year for 20 years got 4.19 percent. |
