Duke-Progress Energy mega-merger concern? Like King Kong marrying Godzilla
Wake up and good morning. The mega-merger between Duke Energy and Progress Energy (whose Progress Energy Florida provides the bulk of electricity for west central Florida) may not come off as smoothly as the big power companies hope.
Federal regulators say the merger between Duke Energy and Progress Energy, both based in North Carolina, can go forward only with sweeping restrictions. The Federal Energy Regulatory Commission issued a 97-page ruling Friday, raising the possibility that the merger is in trouble unless the companies can find a way to resolve the agency's numerous concerns.
Here's the best quote from a North Carolina attorney who represents a small N.C. town worried the combined Duke-Progress Energy will become an electricity bully:
It's like King Kong and Godzilla getting married and telling the regulators that the issue of their union will be Bambi.
As reported here by the Raleigh (Progress Energy's headquarter town) News & Observer, the federal commission said the corporate merger would "have an adverse effect on competition" in the Southeast's electricity market, characterizing the problems as "significant," "systematic" and "severe."
Hey, we could have told you that in only 96 pages.
Don't worry, though. The FERC will undoubtedly okay this deal after some saber rattling for the public. The commission conditionally approved the merger but said Duke and Progress Energy had 60 days to propose solutions if they wished to proceed with the merger. The agency's suggested remedies are to sell off power plants, build new transmission lines, or join a regional transmission authority (which apparently means ceding control over their transmission system to an independent operator).
Indeed, in a follow-up story in the News & Observer this weekend, both companies vowed to act swiftly to make their merger agreement acceptable to the Federal Energy Regulatory Commission. Read more here.
That great King Kong-Godzilla quote above, by the way, is from John Coyle, a Washington-based utilities lawyer. He was hired by New Bern, a city of 30,000 about 120 miles east of Raleigh, which urged the FERC to beware of the merger's consequences for small towns, the News & Observer reports.
Meanwhile, Progress and Duke have announced plans to eliminate 2,000 positions in the merger as part of their consolidation. Keep in mind that Duke does not serve the Florida market, so the overlap of between Duke and Progress Energy is mostly in the Carolinas. Barring greater upheaval than these merger concerns, however, look for a finalized merger by early 2012. The resulting firm, to be based in Charlotte, N.C., will be the biggest electric power company in the country.
And just as a reminder, the head of Duke, James Rogers, has been very straightforward in interviews. Electricity rates are heading up significantly in the years ahead. Read more about that here.
-- Robert Trigaux, Business Columnist, St. Petersburg Times