North Carolina regulators suspended their rules this morning to allow Progress Energy and Duke Energy to make speedy modifications to their proposed merger as the two power companies try to stick to their schedule to get the $26 billion completed this year.
The green light means that Progress and Duke will file their modifications today with the Federal Energy Regulatory Commission. That agency last month said it would not approve the merger without extra safeguards to prevent the combined companies from manipulating the market price of electricity.
Charlotte-based Duke and Raleigh-based Progress are proposing to form the nation's largest electric utility. The deal requires approval from the federal commission as well as the N.C. Utilities Commission, with parallel reviews taking place simultaneously in Washington and Raleigh.
The federal commission said Sept. 30 that the proposed merger raises serious and systematic market power concerns. The feds could alter the merger to such a degree as to require another round of public hearings in this state, which could delay the proceedings for months.
In order to make a speedy filing to the federal commission, however, Progress and Duke needed special permission from the N.C. Utilities Commission. The state commission's rules say that any FERC filing that could affect price and service here have to wait 30 days before being filed with the federal commission -- a provision intended to give state officials sufficient time to review the implications of the changes.
The Public Staff, North Carolina's consumer advocacy agency in utility matters, supported the utilities' request for expedited filings, saying the planned filing would not affect local electricity costs or service. The Public Staff's Chief of Staff, Anotoinette Wike, told the commission that letting the utilities file today, rather than waiting several weeks, would be "the most expeditious procedure."
Now that the federal commissioners have raised questions, the N.C. commission is not likely to rule on the merger until the feds issue their ruling on a merger that is acceptable. In the federal proceedings, meanwhile, critics will respond to the utilities' modifications and the federal commission will then decide if the modifications are sufficient or not appease monopoly concerns.
Wike said this morning that the proceedings in North Carolina "may have to be reopened for additional evidence."
Commenting on the uncertainty of the state proceedings, N.C. Utilities Commission Chairman Edward Finley Jr. said: "So we have to stay tuned, I guess."
The utilities will propose what is known as a "virtual divestiture" -- that is, selling off wholesale power at guaranteed prices.
The companies told the N.C. commission earlier this month their modification will entail selling up to 800 megawatts of wholesale power in the winter and up to 225 megawatts in the summer at a price with a fixed profit margin of 10 percent, rather than a negotiated variable profit margin.
The utilities would make this energy sale offer only when they had sufficient generation resources available to meet their regulatory and contractual obligations to supply power to their retail and wholesale customers, including their requirement to keep operating reserves available.
The feds are expected to rule by the end of this year if the proposed measures are adequate to allay concerns of excessive market power.