On May 8, 2012, Duke Energy Corp. (“Duke”) and Progress Energy, Inc. (“Progress”) (collectively, “Applicants”) entered into a supplemental merger settlement agreement with the North Carolina Utilities Commission (“NCUC”) Public Staff. The settlement was filed with the NCUC. The supplemental settlement is intended to address state regulatory impacts of the market power mitigation proposal that the Applicants filed with FERC on March 26, 2012 (see April 2, 2012 edition of the WER), in addition to clarifying provisions in the previous settlement agreement. The Applicants’ current mitigation proposal requires them to build new transmission projects and enter into short-term power sales to address the market concentration impacts of the combination.
Specifically, the Applicants’ agreement requires:
- The Applicants to guarantee $650 million in system savings for Carolina retail customers through fuel blending, purchases and jointly operating the Carolinas generation fleets. The guarantee may extend 18 months beyond the original five-year timeframe if coal consumption at certain plants is less than originally forecast.
- That the Applicants will not seek recovery from North Carolina retail customers for the seven planned transmission projects listed in the mitigation proposal for five years. Applicants may seek recovery after the five years, but must show the transmission projects are needed for adequate and reliable service.
- That during the two to three year interim mitigation period, while the transmission is being built, Applicants will reduce retail rates by $70 million.
- That the Applicants will not seek recovery from North Carolina retail customers for revenue shortfalls or fuel-related costs associated with the interim mitigation power sales agreements.
- The Applicants to not seek recovery from North Carolina retail customers for their allocable shares of the merger severance costs.
The settlement agreement must now be approved by the NCUC. However, the NCUC will likely wait to issue a decision on the settlement agreement until after FERC has ruled on the mitigation proposal. Applicants have requested that FERC issue a decision on that proposal by June 8.