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FERC orders revamp of Duke/Progress merger October 20, 2011

Posted by Laura Arnold in Duke Energy, Uncategorized.
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Dear Readers: The Duke/Progress Energy proposed merger saga continues.
For update on this issue from the Charlotte Business Journal on 10/18/2011 please see: http://www.bizjournals.com/charlotte/blog/power_city/2011/10/duke-energy-progress-energy-push-for.html

On 10/19/2011, Duke Energy Chairman, President & CEO James Rogers participated in a “Utility Executives Roundtable” during Solar Power International (SPI) in Dallas, Texas. When I get a chance I will share more of Mr. Rogers’ comments with you but his mantra was: “We [Duke Energy] can do solar better, faster and cheaper.”  Also I heard on the floor of the Expo that another Duke Energy executive has stated that Duke wouldn’t seriously consider any solar programs from Duke Energy Indiana UNTIL Indiana has a mandatory Renewable Portfolio Standard (RPS).

 Laura Ann Arnold
Original Article: http://www.maconnews.com/news/state–region/1888-ferc-orders-revamp-of-dukeprogress-merger

Thursday, 13 October 2011 Written by Brittney Parker — Staff Writer

Cites concerns over possible monopoly in utility market.

The Federal Energy Regulatory Commission (FERC) has conditionally authorized the proposed merger of Duke Energy and Progress Energy, after expressing reservations regarding the possibility of the merger having an adverse effect on competition in the Carolinas utility market.

On Sept. 30, the FERC issued an order which stated the companies have up to 60 days to propose measures to address the energy market concerns.

Duke Energy Chairman, President and CEO Jim Rogers, and Progress Energy Chairman, President and CEO Bill Johnson said in a joint statement:

“We believe our proposed merger will provide significant customer benefits and protections, and we are confident that we will meet the FERC’s standards for approval. We are still working toward closing the merger by year’s end.

“We plan to file detailed mitigation measures within about two weeks to address the FERC’s concerns about market power in the Carolinas.”

In order to assure federal regulators that the two power companies will not form a monopoly and be able to manipulate electrical prices in North Carolina, the proposed merger will have to be reevaluated and adjusted according to FERC standards.

According to information released from Duke Energy, if the merger is completed, it will create the nation’s largest electric utility, as measured by enterprise value, market capitalization, generation assets, customers and numerous other criteria. The combined company is expected to have more than 7.1 million electric customers in six states (North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky) and the largest regulated nuclear fleet in the country.

Companies establish mitigation plan to address FERC concerns

According to Thomas Williams of Duke Energy, Duke and Progress Energy presented its basic strategy on Monday, which addressed the merger market power concerns of the FERC – proposing a concept to offer power during peak times of the year at an incremental cost, plus 10 percent. Williams noted that the basics of the plan will be provided in a filing with the North Carolina Utilities Commission (NCUC). “The NCUC must see certain filings going to the FERC 30 days before those filings are sent,” said Williams. “We are asking the NCUC to waive its 30-day rule – and allow the companies to move forward. We will be prepared to file with the FERC immediately after the NCUC waives its notice requirement or the notice period ends.”

In compliance with the request of the FERC, the companies are exploring a “virtual divestiture” approach by drafting a mitigation plan which would remain current for eight years .

As of yet, the mitigation plan does not include the sale of physical assets; rather, it involves offering to sell a certain amount of power into the market. The mitigation plan will not impact the $650 million of guaranteed fuel and joint generation dispatch savings included in the proposed settlement between the companies and the NC Public Staff.

Under the revised plan, the merged company must offer to sell energy during each hour of the summer months (June-August) and winter months (December-February) in the relevant balancing areas. “In general, the balancing area is our transmission system area which we are responsible for operating,” explained Williams. “For summer hours 500 megawatt-hours will be offered in the Progress Energy Carolinas (PEC) East balancing area, and 300 MWh will be offered in the Duke Energy Carolinas (DEC) balancing area. For winter hours, 225 megawatt-hours will be offered within the balancing area of DEC.”

According to Williams, the only current limit on the obligation to offer the energy is that the merged company must have generation resources available, and not used to serve retail and wholesale native load or existing firm sales (including operating reserves).

To address the FERC’s reservations concerning the merger’s potential control on electricity rates throughout the state, Williams explained that the mitigation plan outlines standards of price control. “The price of the offering will be the average incremental cost of producing the required amount of energy, plus 10 percent, forecasted on a day-ahead basis,” explained Williams. “The energy purchased during the offer process will be delivered subject to interruption only if necessary for reliability reasons.”

To ensure the mitigation plan is carried out according to FERC and NCUC standards, Williams noted that the monitoring of compliance will be provided after-the-fact by an independent market-monitoring entity.

On another note, Duke will host several public hearings for any citizen that wants to offer their input about Duke’s rate increase. One public hearing will be on Wednesday, October 26, in Franklin. The meeting will begin at 7:00p.m. in the Macon County Courthouse, Courtroom A, 5 West Main Street.

In total, Duke will host six public hearings, including Franklin’s. One meeting will be in Marion on Tuesday, October 25. High Point will host a meeting on Thursday, October 27. Durham will hold their public hearing on Wednesday, November 2. Raleigh will host Duke’s last public hearing on November 28. Duke held a public hearing in Charlotte on Tuesday, October 11.


CAC Asks: Is IURC silence on Duke/Progress Merger Lack of Jurisdiction or Lack of Transparency? August 22, 2011

Posted by Laura Arnold in Duke Energy, Indiana Utility Regulatory Commission (IURC).
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NEWS RELEASE from Citizens Action Coalition of Indiana

For Immediate Release                                      Contact:  Kerwin Olson (317) 735-7727

August 22, 2011

Today, in a letter to Indiana Utility Regulatory Commission Chairman James Atterholt, the Citizens Action Coalition raised concerns with respect to the Commission’s apparent lack of engagement to date, at least publicly, in the proposed merger between Duke Energy and Progress Energy.  CAC also submitted a public information request seeking any communications regarding the proposed merger between and among officials of both Duke Energy and Progress Energy with the IURC and other State agencies.

“We find it difficult to understand why the Commission has not already begun a public investigation into the consequences of this proposed merger on the customers of Duke Energy Indiana,” stated Kerwin Olson, Interim Executive Director of CAC.  “Especially considering the recent behavior of Duke Energy not only with inappropriate communications with the Commission, but also with the gross mis-management of the problem plagued Edwardsport IGCC.”

Duke Energy and Progress Energy are positioned to become the nation’s largest electric utility later this year.  Shareholders of the two companies are scheduled to vote on the deal tomorrow, August 23, 2011.  The deal is worth an estimated $26 billion still requires approval from various State and Federal regulators as well as the company’s shareholders.

Mr. Olson continued: “While the IURC lacks the jurisdiction to review or approve the stock exchange effecting the merger itself, the Commission does have the authority to review the impact the proposed merger will have on Duke Energy Indiana’s retail electric customers.  In addition, Indiana Code does grant the IURC authority to review and approve all affiliate transactions and agreements required to implement the merger to ensure that those agreements are in fact in the public interest.”

More specifically, Indiana Codes states:

IC 8-1-2-49

Inspection of books and records; affiliated interests; jurisdiction; annual reports

Sec. 49. . . .    (2) Said commission shall have jurisdiction over affiliated interests having transactions, other than ownership of stock and receipt of dividends thereon, with utility corporations and other utility companies under the jurisdiction of the commission, to the extent of access to all accounts and records of joint or general expenses, any portion of which may be applicable to such transactions, and to the extent of authority to require such reports to be submitted by such affiliated interests, as the commission may prescribe….

No management, construction, engineering, or similar contract, made after March 8, 1933, with any affiliated interest, as defined in this section, shall be effective unless it shall first have been filed with the commission. If it be found that any such contract is not in the public interest, the commission, after investigation and a hearing, is hereby authorized to disapprove such contract.

The Commission did exercise this jurisdiction in 1995 when then PSI merged with Cinergy, and then again in 2005 when Cinergy merged with Duke Energy, both of which led to agreements that flowed back some of the merger benefits and savings and provided other important protections to Indiana electric customers.  Moreover, the Commission exercised this jurisdiction before not after the prior mergers had been consummated.  Of particular relevance here are the modified settlement agreement and final order approved by the IURC regarding the Duke-Cinergy merger on March 15, 2006 in Cause No. 42873.

Mr. Olson concluded: “We are hopeful that the Commission will recognize the potential negative impact to Indiana electric customers that this proposed merger presents.  The benefits of a merger of this size at a minimum should be equally shared by shareholders and ratepayers.  Ratepayers should not be asked to bear the costs of a transaction that may only serve to increase their electric bill and adversely affect the service they are provided.  In addition, the existing affiliate agreements and regulatory commitments and conditions approved at the time of the Duke-Cinergy merger provide important protections to DEI’s Indiana customer.  Those protections should not be surrendered without a fight to the new utility behemoth that would result from the proposed merger.  Shareholders, executives, and the headquarters city of Charlotte, NC should not be the only winners to come out of this deal if it is ultimately approved.”

Download a copy of the news release here. CAC News Release on Duke-Progress Merger_22Aug2011