Duke-Progress deal facing competition worries
Friday, December 16, 2011
RALEIGH, N.C. (AP) — Federal regulators are blocking Duke Energy’s planned acquisition of Progress Energy to form the country’s largest electric company, ruling the companies haven’t done enough to protect competition in their North Carolina and South Carolina home markets.
The Federal Energy Regulatory Commission had scheduled a Thursday hearing on changes to the acquisition plans in Washington, but regulators surprised the utilities late Wednesday by rejecting the companies’ solution to protect competition.
The companies said in a joint statement Thursday that they remain committed to completing the deal. They said that they will submit a new proposal to the commission addressing its concerns.
FERC’s action will delay completion of the acquisition until at least March, the companies said. They had hoped the deal would close before the end of this year. In August, shareholders of both companies approved the buyout valued at $13.7 billion when it was announced in January.
Jefferies & Co. analyst Paul Fremont said the companies’ next move will be to take a serious look at their power plants and decide which can be sold. Any proposed sale must be reviewed by state regulators, who would need guarantees that it wouldn’t affect pre-negotiated power rates for utility customers.
The federal agency in September questioned the deal’s impact on customers in North and South Carolina. Regulators suggested that the companies consider a number of measures that would diminish their influence, such as selling power plants, building new transmission lines, or giving up control of their transmission system to a regional operator. 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 ruling said.
Duke first announced it planned to buy Progress in January for $13.7 billion. If approved, the combined company will serve 7.1 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky.
The two companies have received approval from, or met the conditions of, several other government agencies, including the Department of Justice, the Nuclear Regulatory Commission, the Federal Communications Commission and the Kentucky Public Service Commission. Shareholders have also approved the deal.
Duke shares rose 19 cents to $21.04 Thursday while Progress shares fell 68 cents, to $53.75.