Duke Energy and Progress Energy will offer to limit their corporate profit on the sale of large chunks of power in this state to assure federal regulators that the two companies will not manipulate electricity prices after the they merge.
The two utilities submitted their proposal this afternoon to the N.C. Utilities Commission and are asking for permission to make an expedited filing to the Federal Energy Regulatory Commission. Normally the companies would have to wait 30 days to make the federal filing.
The federal agency said last week the proposed merger between the two North Carolina companies raises severe and systematic concerns about market power control. The agency suggested selling off power plants, guaranteeing the cost of wholesale power or giving up control of transmission lines.
Charlotte-based Duke and Raleigh-based Progress say they can address those concerns by offering to sell up to 800 megawatts of power in the summer and up to 225 megawatts in the winter while limiting their profit on those sales to 10 percent above the cost of generating the electricity.
"We believe this satisfies the FERC market screens," said Duke spokesman Tom Williams. "The benefit of this is that they [purchasers of wholesale power] have access to the power on the day ahead market at a price that is not far above the cost of producing that power."
Presumably the two companies would pocket less money but the economic impact of the proposal won't be known until regulators and others analyze the data.
The offer is largely illusory, said John Coyle, a Washington utilities lawyer representing the city of New Bern in the FERC proceedings. Coyle said the electricity being offered for sale is expensive and hard to sell.
"This is very high-priced stuff," Coyle said. "It's not the most desirable product on the market. At that price it's pretty well priced out of the market most of the time."
New Bern is challenging the Duke-Progress merger, saying it will eliminate competition and raise wholesale prices.
If the proposal is not sufficient to mollify the federal agency's concerns, Duke and Progress could attempt to revise their merger again or they could walk away from the $26 billion deal.
The proposed mitigation measures would be in place for eight years. If the companies had offered to sell power plants or shares of power plants, the measures would have been permanent.