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Utilities say merger won't stifle markets

Florida Progress and CP&L seek speedy approval of their deal, which they say will not hurt competition.

Florida Progress Corp. and Carolina Power & Light told federal energy regulators Thursday that their pending $5.3-billion merger will not harm wholesale competition in the Southeast.

The deal, the utility companies said in their application to the Federal Energy Regulatory Commission, will make them stronger but not large enough to dominate the region's power markets and control electricity prices. For that reason, they asked the FERC to approve the merger by June 30 _ a speedy resolution by regulatory standards.

The utilities are seeking a quick resolution because they want to complete the deal in September, about one year from the time CP&L agreed to buy Florida Progress, the parent company of Florida Power Corp. of St. Petersburg.

The FERC regulates electric-utility mergers to make sure they are "consistent with the public interest." That means the commission decides whether the combination will diminish competition in the bulk power markets and adversely affect wholesale rates and government regulation.

The FERC does not have jurisdiction over the power rates of consumers and businesses. But competition in the wholesale market is picking up as utilities try to lower their costs by selling excess power or buying electricity that is cheaper than producing it on their own. The trading of bulk power is ultimately reflected in electric bills.

"If the newly combined company were to monopolize transmission and shut out other sources of competition, that would harm the consumer," FERC spokeswoman Barbara Connors said.

The agency has been criticized for taking 18 months or longer to review mergers. Industry analysts have blamed the extended process for stifling merger activity and, in some cases, terminating announced deals.

But the FERC's recent approval of the deal between Northern States Power Co. of Minneapolis and New Century Energies of Denver in five months is a good sign for CP&L's proposed buyout of Florida Progress, analysts say.

"It used to take forever," said Dave Parker, an analyst at Robert W. Baird & Co. in Milwaukee. "Now, if you don't have a lot of issues, five months is not an unthinkable time line."

The combination of CP&L, based in Raleigh, N.C., and Florida Progress would create a Southeast powerhouse that owns more than 18,500 megawatts of electricity. The newly combined company would have less generating capacity than Southern Co. in Atlanta and slightly more than Duke Energy Corp. in Charlotte, N.C. "I don't think there are any anti-competitive concerns," Parker said.

To appease federal regulators, however, CP&L and Florida Progress plan to divest 135 megawatts of power, which is less than 1 percent of their combined output, for six years after the deal closes. The divestiture will be through a sale of power, not the sale of a power plant.

The companies also plan to establish or join regional transmission organizations, which are independent overseers of the long-distance power lines that carry bulk power. The FERC is advocating such organizations to ensure equal access to the transmission grid. The commitment is a shift in policy for both companies.

"We have not in the past thought that there were issues in our region in terms of transmission," CP&L spokesman Keith Poston said.

The FERC approval is just one of several regulatory okays needed before the merger can be completed. In the next several weeks, the companies will make filings with the Securities and Exchange Commission and the Department of Justice.

CP&L also must seek approval from utility regulators in North Carolina. The transaction does not need the approval of regulators in Florida and South Carolina.

Florida Progress stock rose 81\ cents to $44.68} Thursday. CP&L shares climbed 68} cents to $33.81\.