The towns of New Bern and Rocky Mount, which have been fighting the proposed merger between Progress Energy and Duke Energy for more than a year, slammed the utilities’ latest attempt to appease the monopoly concerns of federal regulators.

In filings Wednesday with the Federal Energy Regulatory Commission, the towns characterized the companies’ March proposal as “legal legerdemain” that would do little to address concerns raised by creating the nation’s largest electric utility. The legal fight waged by the two eastern North Carolina towns was largely dismissed as quixotic until the federal commission stunned Duke and Progress executives last year by soundly rejecting the merger.

The filings, coming on the deadline for responses, set the stage for a final ruling from the federal commission this summer. New Bern and Rocky Mount are represented by a legal team in Washington that contends that shopping for wholesale electricity will become harder if the state’s two biggest suppliers, Charlotte-based Duke and Raleigh-based Progress, are allowed to combine into one giant company.

The federal commission has already rejected the proposed $26 billion merger twice, each time offering the utilities the option of revising their proposal. The companies had originally hoped to consummate the deal by the end of 2011. The have revised their deadline to July. It’s not clear whether the companies are willing to walk away from the deal or whether they will keep trying to come up with a workable solution that shareholders can live with.

Duke and Progress are attempting to appease federal regulators in a way that is also palatable to North Carolina regulators, who have yet to rule on the merger. Many of the options available to limit power market domination – such as selling off power plants or joining a regional transmission organization – are almost certain non-starters for the N.C. Utilities Commission. Such options would either increase costs for customers or give up some state oversight to the federal government.

The companies in March proposed building $110 million in transmission upgrades and selling wholesale power during the interim until the upgrades are completed.

But New Bern and Rocky Mount contend those proposals are mere smokescreens. They say the temporary power sales agreements contain “escape hatches” that don’t force Duke and Progress to give up control of their power.

The towns also say the transmission projects are inadequate because they likely would have been built anyway. What’s more, the towns argue, the upgrades are contingent on the N.C. Utilities Commission ruling that utility customers will pay for the projects, something the state’s Public Staff, which advocates for consumers, has vowed to fight.

Murawski: 919-829-8932