Duke, Progress Energy to re-submit merger bid

The (Raleigh) News & ObserverJanuary 4, 2012 

DURHAM — Duke Energy and Progress Energy expect to submit a new proposal for their corporate merger this month as the North Carolina power companies make a third attempt to appease federal monopoly concerns.

Progress CEO Bill Johnson, who would run the combined Duke Energy out of Charlotte, said Tuesday that the trick will be to preserve the $650 million in savings promised to regulators in the Carolinas while also selling off a sizable chunk of electricity into wholesale markets to appease federal regulators.

"None of this is easy," Johnson said. "Part of the modeling process is: What would you sell and at what price, and who would buy it?"

Johnson provided an update on the status of the merger, announced one year ago, during a break at the Economic Forecast Forum in Durham.

Johnson was a keynote speaker at the forum, which is sponsored by the N.C. Bankers Association and N.C. Chamber, two of the state's most powerful business lobbies.

He noted that federal regulators have not questioned the merits of the proposed merger, which would create the nation's largest electric utility.

Johnson stressed that the efficiencies achieved through the merger would make it easier to pay for building new power plants, comply with costly environmental regulations and upgrade the aging power grid.

Executives at Duke and Progress had expected to have the merger completed last month, but they ran into snags when the Federal Energy Regulatory Commission twice rejected their proposals. The federal commission said the companies must address concerns that the combined Duke would become so large it could manipulate wholesale electricity prices.

"Everyone who follows these things was fairly surprised by the first two orders," Johnson said, referring to the FERC's rulings in September and December that the proposed merger needs more work.

Johnson did not offer many clues as to what concessions the companies are considering. The federal commission said they could sell off wholesale power, sell off stakes in their power plants or build more transmission lines.

But what is clear is that structuring the merger has become more complex than the companies had anticipated.

"I do think there are solutions here," Johnson said. "This is a complex economic modeling process."

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