Oct 10 - The News & Observer

When an online news service reported last month that Progress Energy was in secret merger talks with Southern Co., environmentalists in North Carolina let out a collective groan.

Few electric utilities have elicited the enmity of environmentalists in past years as has Southern, one of the nation's largest utility companies, based in Atlanta. In past campaigns, environmental groups have labeled Southern as the nation's worst-polluting utility and have denounced the company as a slick, lobbying powerhouse.

"The size and scope of the company makes it a national target," said Tyson Slocum, energy program director at Public Citizen in Washington. "It's very politically powerful. They're used to getting their way."

Neither Southern nor Progress commented on the speculation that they're in merger talks. Last month's report in SparkSpread, based on an anonymous source, was the second such report in six months. In March, another industry news service published a similar report, also based on an anonymous source.

It's not clear how the prospect of Southern's executives in Atlanta calling the shots at Raleigh-based Progress Energy would affect energy policy in North Carolina. But environmental activists worry that Southern would stall or set back the state's momentum on environmental issues.

Progress Energy has come in for its own share of criticism for coal plants that pollute and for allegedly unsafe nuclear performance. But environmentalists say that Southern stands out in the conservative utility sector as one of the slowest utilities to adopt change.

Among Southern states, North Carolina is regarded as one of the most progressive in energy efficiency and conservation. It started one of the first public benefit funds in the nation, taking 3 cents out of a typical residential bill to finance Advanced Energy, a Raleigh nonprofit group that promotes energy efficiency.

The state is studying the pros and cons of requiring electric utilities to generate or buy a percentage of their electricity from renewable sources such as solar, wind, landfill gases or animal wastes.

"If the two merged, it would look grim for moving things forward in terms of clean energy," said Elizabeth Ouzts, state director for Environment North Carolina, an advocacy organization.

Ouzts is concerned that Southern could challenge existing policies and oppose proposals that environmentalists favor.

Southern's reputation as a heavy polluter rests in large part on its size and influence, coupled with its dependence on coal to generate electricity.

Southern's utilities in Georgia, Mississippi, Alabama and Florida boast some of the cheapest electricity in the nation. But 71 percent of that electricity comes from coal, the dirtiest fuel used by utilities. As a result, Southern consistently ranks as one of the dirtiest utilities in the nation, even though the company has been retrofitting plants with pollution controls to meet state and federal regulations.

Some major utilities, including Duke Energy in Charlotte, have come out in favor of a carbon tax or other restrictions on greenhouse gas emissions. However, Southern remains firmly opposed to these measures, saying that they would force the company to increase rates to cover higher production costs.

"We certainly believe we have to preserve coal as a source of electricity," said Southern spokesman Jason Cuevas. "It's the nation's most abundant fuel source."

Not everyone is alarmed by Southern Co.

Advanced Energy's president, Bob Koger, said an out-of-state utility wouldn't get far trying to turn North Carolina politicians and regulators into puppets.

"It wouldn't work. They'd have a confrontation with the utilities commission and with the legislature," said Koger, a former chairman of the N.C. Utilities Commission. "It doesn't matter who owns the utility, frankly. And we've got a strong environmentalist community here."

The utilities commission and legislature oversee energy policies, and the commission must approve rate increases. None of that would change if Southern bought Progress.

And in the past few years, Southern has demonstrated a willingness to change, some say.

Southern this year announced plans to develop a clean coal plant in Florida using a technology that turns coal into a gas. The 285-megawatt plant is a joint project of Southern, the Orlando Utilities Commission and Kellogg Brown and Root, the energy services subsidiary of military outsourcing firm Halliburton.

Last year, Southern teamed up with the Georgia Institute of Technology to explore the potential of creating a 10-megawatt wind energy project, comprising three to five turbines, off the coast of Savannah. Such a project could generate enough power for 2,500 homes.

Like Progress Energy and Charlotte-based Duke Energy, Southern plans to license two new nuclear reactors, at its Vogtle Electric Generating Plant in eastern Georgia, near the South Carolina border.

In March, Southern said it would jointly apply with Duke Energy for a license to build a nuclear plant in South Carolina. The expansion of nuclear power would reduce Southern's reliance on coal, but place the company into the nuclear controversy, including the unresolved issue of how to permanently dispose of nuclear waste that remains highly radioactive for thousands of years.

Progress Energy plans to license additional reactors at the Shearon Harris nuclear plant in southwestern Wake County, as well as at a site in Florida that has not been announced.

Environmental groups plan to fight the nuclear applications.

Nuclear waste has caused Southern a major embarrassment recently. Last year, the company admitted that it couldn't account for about 5 feet and 8 inches of radioactive spent-fuel rod in an on-site storage pool at the Edwin I. Hatch Nuclear Plant in southeastern Georgia. The company eventually located most of the waste, but about 18 inches of the material remains unaccounted for. It's thought to have broken up in small fragments in the waste pool or to have been accidentally moved off-site to a low-level nuclear waste facility.

The Hatch plant was one of several nationwide that reported missing nuclear waste, feeding into critics' concerns that radioactive material could get into the wrong hands.

"The fact that they lost high-level nuclear waste calls into question their ability to be responsible with the additional Progress Energy reactors," said Mary Olson, southeast director of the Nuclear Information & Resource Service, a nuclear opponent.

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Copyright (c) 2006, The News & Observer, Raleigh, N.C.

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