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N.C. regulators hire law firm to probe Duke Energy

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North Carolina utilities regulators said Wednesday they have hired a former federal prosecutor with experience digging into corporate affairs to reveal whether regulators were misled ahead of a takeover that created America's largest electric company.

The North Carolina Utilities Commission said it has hired Anton Valukas and the Jenner & Block law firm, which he heads in Chicago. The ex-prosecutor and his firm are tasked with investigating what happened before regulators approved Charlotte-based Duke Energy Corp. taking over Raleigh-based Progress Energy Inc.

State law allows the costs associated with the utilities commission's investigation to be charged to Duke Energy and its shareholders rather than allowing the company to pass them along to its 3.2 million North Carolina customers.

A Duke Energy spokesman said the company was cooperating with regulators in their investigation.

The company on Wednesday separately sought to begin passing along to Carolinas energy consumers the first $89 million of $650 million in merger-related savings promised over the next five years. If that is approved, the average residential customer in North Carolina and South Carolina could save between 80 cents and 92 cents a month beginning in September.

Duke Energy and Progress Energy completed their merger last month, days after approval by North Carolina regulators. Hours after the deal was concluded, Duke Energy's board ousted the CEO promised throughout the 18-month process of combining North Carolina's two Fortune 500 energy companies.

The resulting uproar led credit ratings agency Standard & Poor's to lower Duke Energy's credit rating. The company's share price fell as much as 6.5 percent since the day the merger closed and on Wednesday it closed 3.4 percent below its price before the CEO switch was announced.

Utilities regulators and North Carolina's attorney general have to launched investigations that have included extensive demands of internal documents and communications.

Duke Energy now has 7.1 million residential and business customers in North Carolina, South Carolina, Ohio, Kentucky, Indiana and Florida.

Valukas was the top federal prosecutor in Chicago in the 1980s and now is the chairman of Jenner & Block. He was the court-appointed examiner in the Lehman Brothers bankruptcy case. He found that the investment bank hid $50 billion in debt before its 2008 collapse, which created a crisis that rippled throughout the world's financial system.

The North Carolina commission's investigation could take months. The last time the commission launched a similar investigation, it hired outside auditors who took nine months to comb through Duke's books. They found Duke underreported profits by $124 million over three years. Duke paid $25 million in a settlement that included no admission of wrongdoing.

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