Duke CEO Rogers sees potential halt in power-demand growth, as prices rise
New York (Platts)--8Nov2011/457 pm EST/2157 GMT
Differing from some of his utility CEO colleagues, Duke Energy Chairman,
President and CEO Jim Rogers said Tuesday that growth in power demand may
have stopped, as price increases loom.
"My view of the future is a steep increase in prices, versus the past 50
years when real prices declined. It's an open question what demand growth
will be. A compelling case could be made it could be in the flat zone," he
said during a joint presentation with Progress Energy at the Edison Electric
Institute Financial Conference in Orlando, Florida. Presentations are also
Rogers' take on growth is different from that of American Electric Power
CEO Mike Morris and Wisconsin Energy CEO Gale Klappa, who both said Monday
they see long-term demand growth at about 50% to 60% of the rate of growth in
the US gross domestic product.
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Rogers based his predictions on his expectation that economic growth
will be "anemic ... I do not see the manufacturing base coming back. Our
economy is becoming less energy intensive, by 3% each year. Distributed
generation and solar will increasingly play a role."
New technologies that enable usage reductions and appliance efficiency
standards will also play a growing role, he continued.
"[Meanwhile] we're raising rates in tough economic times. In some sense,
it's like we're back in the 1970s," Rogers said.
That will lead to growing consumer and regulatory pushback against rate
hikes, he predicted. Utilities will have to offset that with better
regulatory relations, based on operational excellence and good customer
relations, he added.
"The regulatory model will start to change. Decoupling is a half-step
towards formula rates, which are the real answer. That will smooth out the
increases that are coming. At the end of the day, changing that regulatory
model will be key to earning allowed returns in a timely way."
Now in his 23rd year as a utility CEO, Rogers noted that "This is
probably my last opportunity to present at the EEI Financial Conference."
Once the planned acquisition of Progress Energy closes, he is to become
executive chairman of the larger Duke, advising CEO Bill Johnson on strategic
matters and serving as lead spokesman on energy policy.
Introducing Johnson, he said: "I'm the largest individual shareholder in
the industry. I want him to get that dividend up."
Rogers predicted more deals, leading to perhaps 25 power companies
within 10 years, about half the current number of investor-owned power or
power and gas utility companies.
"This is my third deal. I wish I was going to be around for the next 20
years to finish it off ... I do think more [deals] will come in time for the
new Duke," he said.