Progress Energy and Duke Energy made their third - and most expensive - merger proposal on Wednesday in their bid to win approval for the $26 billion deal from regulators in Raleigh and in Washington.
The two power companies propose investing up to $150 million in transmission line upgrades to make it easier for competing utilities to sell wholesale electricity in this state. The upgrades would help clear transmission bottlenecks between North Carolina and its neighbors, Virginia and South Carolina.
The proposal is intended to address concerns at the Federal Energy Regulatory Commission in Washington that as a merged power company, Duke Energy would become so dominant it would be able to manipulate the price of wholesale electricity in the region. The commission previously rejected the merger in September and for a second time in December.
The cost and extent of the concessions will almost certainly require North Carolina regulators to reopen merger proceedings in this state, potentially holding another round of hearings. The extra innings will prolong regulatory merger reviews into the summer as state regulators and company executives negotiate who will pay for the transmission upgrades - customers or shareholders.
North Carolina regulators will insist that the cost of the transmission lines and related expenses be borne by shareholders if the merger is to be approved.
"This time there's clearly some potential impact on retail customers," said Gisele Rankin, a lawyer with the Public Staff, the state's consumer protection agency in utility rate cases.
Duke CEO Jim Rogers said in a statement that the transmission line proposal strikes a balance at preserving the merger's financial benefits for customers and shareholders.
Raleigh-based Progress and Charlotte-based Duke had hoped to have their merger approved by last December and are well along in their strategy to eliminate 1,860 jobs as they move to consolidate their corporate headquarters in Charlotte. The companies are proposing to form the nation's largest electric utility, with 7.1 million customers in six states.
One of the most vociferous critics of the merger, Washington, D.C., lawyer John Coyle, said the latest proposal is more ambitious than previous attempts. Coyle represents the towns of Rocky Mount and New Bern, which have fought the merger for more than a year. Coyle said it was too early to say whether the new plan would work for his clients.
"They've gotten a little bit more serious," Coyle said. "They're talking about putting real money into the system."
The transmission upgrades - additional cables and equipment - will be done on existing power corridors. During the three years it takes to upgrade the lines, the companies would sell up to 800 megawatts of electricity to wholesale customers, such as other electric utilities, rural electric cooperatives or municipal power agencies.
