Duke, Progress merger put on hold by feds' ruling
Posted December 15, 2011 5:55 a.m. EST
Updated December 15, 2011 4:26 p.m. EST
Washington — Federal regulators delayed the proposed merger of Duke Energy and Progress Energy late Wednesday, setting back plans to merge the two North Carolina-based utilities by the end of the year.
The Federal Energy Regulatory Commission ruled that the $35 billion deal, which would create the nation's largest electric utility, would have "harmful effects on competition."
Despite the ruling, company officials said they remain committed to the merger and will adjust their proposal to meet regulators' concerns. The earliest a merger could be completed is now March, they said.
"The FERC ruling does not call into question the benefits of the merger," the companies said in a joint statement. "The combination of Duke Energy and Progress Energy will provide clear benefits for our customers, including overall lower corporate costs and $650 million in guaranteed benefits to customers in the Carolinas from the joint dispatch of the utilities' generation fleets and from power plant fuel savings.”
Any deal must also be approved by the North Carolina Utilities Commission, which had been awaiting a federal ruling.
Mike Hughes, a spokesman for Progress Energy, called the ruling a "bitter pill" for employees who have been working in limbo while plans for the merger moved forward.
The federal agency said in September the companies should change merger details and suggested steps such as selling power plants. The companies responded last month with a plan to sell excess electricity at a fixed price to wholesale buyers in their Carolinas territories.
Regulators now say the proposal by Charlotte-based Duke and Raleigh-based Progress doesn't go far enough.
The "mitigation proposal does not remedy the proposed transaction's adverse effects on competition," the FERC said.
- "The supporting analysis for the mitigation proposal is flawed and does not demonstrate that the mitigation proposal would remedy the market power screen failures identified in the September order.
- "The mitigation proposal does not eliminate the opportunity for the merged company to act anti-competitively. Although Duke and Progress describe the proposal as a virtual divestiture, it would not transfer control of the energy the applicants propose to sell from the merged company.
- "The independent monitor proposal would not provide sufficient oversight of the applicants’ compliance with the mitigation proposal."
The merger would have eliminated 700 to 1,000 positions in Raleigh as Progress Energy shifted its headquarters to Charlotte. Software developer Red Hat had announced plans to move into the downtown Raleigh buildings vacated by Progress Energy.
The combined company would have had 7.1 million power consumers in the Carolinas, Florida, Kentucky, Indiana and Ohio. It would have become the country's largest utility company by number of customers, retail revenue and generating capacity, according to Edison Electric Institute, the country's main electric utility trade group.
The U.S. Department of Justice, the U.S. Nuclear Regulatory Commission, the Federal Communications Commission, the Kentucky Public Service Commission and shareholders of both companies have already approved the merger.