Duke Energy to sell Midwest electric generation business

LOCAL IMPACT

Duke Energy announced plans Monday to exit the commercial electricity generation business in the Midwest, and sell its ownership stakes in 13 coal, natural gas and oil-fired power plants located in Illinois, Ohio and Pennsylvania.

The move will make Duke Energy a distribution-only business for electric and natural gas to local customers.

Charlotte, N.C.-based Duke Energy, the largest utility provider in the U.S., operates the electric power plants in a separate division from its consumer-facing utility business in Cincinnati and Northern Kentucky. Midwest Commercial Generation, as the division is called, sells electricity generated by its power plants to PJM Interconnection, the organization that operates the Midwest power grid.

Duke Energy expects the sale to take 12 to 18 months to complete.

“We hope we’ll be able to find a single buyer for a package of all the plants,” said Duke Energy spokesman Tom Williams.

The earnings stream of the Midwest power plants “was lower than we would have hoped in recent years,” Williams said. Also, the Midwest power plants’ revenues represent three to five percent of Duke Energy’s total earnings, a small and more volatile piece of the business compared to the majority of the company’s operations in regulated distribution.

Duke “will redeploy the money we get from selling these into the business,” he said.

Meanwhile, the 1.3 million customers of Duke Energy Ohio and Kentucky are “unaffected” by the plans to sell the power plants, he said.

Of the 13 power plants for sale, 11 are in Ohio. All 13 produce a total capacity of approximately 6,600 megawatts. These plants are owned or partially owned by Duke Energy; included on the list is a natural gas-fired power plant owned completely by Duke Energy in Middletown.

Some plants are jointly owned by Dayton Power and Light Co. and American Electric Power, according to Duke Energy.

“We don’t provide any comment about whether or not we’re interested in purchasing any assets,” said Tammy Ridout, spokeswoman for AEP. “We are still in the generation business in Ohio and we don’t have any plans at this point to change that.”

“We have operating agreements that are in place at the plants we co-own that will allow the plants to continue operating essentially as they do today,” Ridout said.

Columbus-based AEP distributes electricity in 11 states to about 5.3 million customers. AEP spun off at the end of 2013 its Ohio generation assets into a separate company, AEP Generation Resources.

DP&L, which has 515,000 Ohio electric customers, provided a statement saying it’s still in the generation business and “today’s announcement by Duke Energy does not change DP&L’s strategy.”

The 13 Duke power plants for sale are staffed by approximately 600 Duke Energy employees and contractors. Typically, a vast majority of employees are retained by buyers of power plants in a transaction like this, Williams added.

The news comes as another player in the utility business plans to build a new power plant in Middletown, and add to the region’s electricity supply.

NTE Energy LLC of St. Augustine, Fla., publicly announced on Jan. 28 plans to build three power plants nationwide fueled by natural gas in Butler County, Ohio; West Texas; and North Carolina.

NTE Energy’s proposal is to build a more than $500 million power plant running on natural gas on 50 acres near the intersection of Cincinnati-Dayton and Oxford State roads. Middletown Energy Center, as the plant is to be called, would generate more than 500 megawatts of electric power to be sold to PJM.

PJM Interconnection serves 61 million people in 13 states, including Ohio and the District of Columbia. It manages the operation of the region’s transmission grid, which includes 62,556 miles of transmission lines.

Officials with NTE Energy could not be immediately reached Monday.

Duke Energy completed in July 2012 a merger with Progress Energy, forming the largest U.S. utility with approximately 7 million customers in six states.