Make us your home page

Feds rejecting Progress Energy-Duke Energy merger

Federal regulators have rejected Duke Energy's proposed multibillion-dollar merger with Progress Energy, the parent of Progress Energy Florida.

The Federal Energy Regulatory Commission said the two companies would retain too much control over power generation while making it difficult for other utilities to buy electricity from them, particularly in the Carolinas.

"The proposal did not adequately remedy the negative effects on competition previously identified by the commission," said FERC Commissioner Cheryl A. LaFleur.

The commission's decision allows the utilities to propose remedies to address regulators' concerns. But this week's action marks the second time the commission has rejected the merger plans.

After announcing the merger in January, Duke and Progress expected to close the deal by the end of the year. That will likely now be delayed until at least the end of the first quarter of 2012, assuming the utilities can find a way to rework the deal to satisfy the commission.

In a joint statement Thursday, Duke and Progress said they "remain committed to proceeding with their planned merger. … The FERC ruling does not call into question the benefits of the merger."

The companies plan to submit a revised proposal to address the commission's concerns. But the commission's decision will delay the merger at least until March, the companies said.

The $26 billion deal is one of the largest corporate mergers this year and would create a utility with 7 million customers in Florida, the Carolinas, Indiana, Ohio and Kentucky. Progress serves Pinellas, Pasco, Hernando and Citrus counties in the Tampa Bay area.

The merger was expected to help the new utility better leverage its money for construction projects and cut costs by combining operations in North Carolina, where Duke is based in Charlotte and Progress in Raleigh.

Shareholders of both companies approved the merger in August. The only hurdles that remained were approvals by FERC and by the states of North Carolina and South Carolina. Those states were awaiting a decision by the federal government before signing off on the deal.

The commission first rejected the merger in October, stating Duke and Progress needed to develop plans to mitigate the impact the big new utility would have on other power companies in the Carolinas.

Commissioners gave Duke and Progress "guidance on what types of mitigation measures the Commission has accepted in the past," FERC said in a statement, but the utilities' latest plan didn't meet that standard either.

Analysts and utility experts said the commission's decision adds delays and obstacles that increase the possibility the merger might not happen.

"FERC is not outright rejecting the merger," said Paul Fremont, an analyst with Jefferies & Co. "They're saying the companies have not met the standards."

Fremont says the large mergers such as the Duke/Progress and the stalled AT&T/T-Mobile deals put forth this year are not meeting the standard government tests of whether they are anticompetitive. Even a change of party in the White House wouldn't help these deals, he said.

Duke and Progress could succeed if whatever proposal they draw up to satisfy the federal government does not hurt customers, Fremont said.

"From my perspective, realistically, the downside is if they propose a plan of action to the FERC, it may be found unacceptable to the states," Fremont said.

The concern would be the impact any plan might have on customer rates.

For Florida, the combined utility's ability to attract more capital would mean potential help with funding the costly nuclear operations Progress has on the books.

Progress' sole nuclear plant in Florida has been out of service since 2009, when the concrete reactor containment building cracked during a maintenance and upgrade project.

The cost to bring the plant back online exceeds $2.5 billion. Progress hopes insurance will pay most of that with its customers paying the rest.

In addition, Progress plans to build two new reactors in Levy County for $20 billion.

With the merger, "you wind up with more capital to borrow against," said Arnie Gundersen, a nuclear engineer and consultant with Fairewinds Associates. "That's what's in it for Progress. There are many more assets on the Duke side."

Gundersen and Jim Warren, of the North Carolina environmental group NC WARN, said the troubles Progress has had with its nuclear fleet — including Crystal River and a leak last month at its Brunswick nuclear plant in North Carolina — coupled with the federal government's rejection of the merger plan leaves the merger in peril.

"It's not the end of it," Warren said. "It lessens the chances they will merge."

Is there a plan to close nuke plant?

State Sen. Mike Fasano, R-New Port Richey, said Progress Energy told him during a recent meeting about the broken Crystal River nuclear plant that if insurance does not cover the repairs the utility may close it.

Progress took the nuclear plant offline in fall 2009 to replace the old steam generators. During the upgrade, the 42-inch-thick concrete containment building cracked. An attempt to repair the building resulted in more cracks.

Asked about Fasano's comments, Progress spokesman Tim Leljedal said the utility remains focused on its plan to repair the building and return it to service in 2014.

Feds rejecting Progress Energy-Duke Energy merger 12/15/11 [Last modified: Friday, December 16, 2011 6:09pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times


Join the discussion: Click to view comments, add yours

  1. Tampa Bay is ground-zero for assignment of benefits cases over broken auto glass


    When Rachel Thorpe tried to renew her auto insurance last year for her Toyta RAV4, she was stunned to see her monthly premium had nearly doubled to $600. The Sarasota driver was baffled since her only recent claim was over a broken windshield.

    Auto glass lawsuits filed by a third party (through what's known as assignment of benefits) are skyrocketing in Tampa Bay.
[Times file photo]
  2. Siesta Beach tops Dr. Beach's rankings of best locations in America


    Three beaches in Florida made it on a highly coveted list of the top 10 in America this year, ranked by Dr. Stephen Leatherman, a.k.a. "Dr. Beach."

    This May 18, 2017 photo shows Siesta Beach on Siesta Key in Sarasota, Fla. Siesta Beach is No. 1 on the list of best beaches for the summer of 2017 compiled by Stephen Leatherman, also known as Dr. Beach, a professor at Florida International University. [Chris O'Meara | Associated Press]
  3. Brooksville's popular Florida Cracker Kitchen aims at statewide expansion


    BROOKSVILLE — Florida Cracker Kitchen's inverted cowboy boot logo — seemingly plastered on every pickup truck in Hernando County — may someday be just as ubiquitous across the state.

    Shrimp and grits is a signature dish at Florida Cracker Kitchen, which plans to open more restaurants in the state.
  4. Alison Barlow named director to spur creative economy, jobs of St. Pete Innovation District

    Economic Development

    After an extensive search, the recently created St. Pete Innovation District now has its first executive director. Alison Barlow on Thursday was named to the position in which she will help recruit and facilitate a designated downtown St. Petersburg area whose assets and members range from USF St. Petersburg, Johns …

    Alison Barlow has been named the first executive director of the recently created St. Pete Innovation District, a designated downtown St. Petersburg area whose assets and members range from USF St. Petersburg, Johns Hopkins All Children's Hospital and Poynter Institute to SRI International and the USF College of Marine Science, among many other organizations. Barlow, who most recently served as manager of the Collaborative Labs at St. Petersburg College, starts her new job June 16.[Photo courtesy of LinkedIn]
  5. Trigaux: Amid a record turnout, regional technology group spotlights successes, desire to do more


    ST. PETERSBURG — They came. They saw. They celebrated Tampa Bay's tech momentum.

    A record turnout event by the Tampa Bay Technology Forum, held May 24 at the Mahaffey Theater in St. Petersburg, featured a panel of area tech executives talking about the challenges encountered during their respective mergers and acquisitions. Show, from left to right, are: Gerard Purcell, senior vice president of global IT integration at Tech Data Corp.; John Kuemmel, chief information officer at Triad Retail Media, and Chris Cate, chief operating officer at Valpak. [Robert Trigaux, Times]