Commission Approves Duke and Progress Merger Subject to Certain Conditions
On June 9, 2012, the Commission accepted the revised compliance filing by Duke Energy Corp. (“Duke”) and Progress Energy, Inc. (“Progress”) (collectively the “Applicants”), paving the way for full Commission approval of their merger. As reported in the April 2, 2012 edition of the WER, Applicants filed on March 26, 2012 proposed measures to alleviate the Commission’s concerns with generation market power that might result from their merger. In last week’s order, the Commission also accepted four power sales agreements submitted by the Applicants as part of those proposed mitigation measures.
In its order, the Commission accepted the long-term, “permanent” mitigation through transmission upgrades proposed by Applicants, but revised somewhat the “interim” mitigation through power sales proposed by Applicants. More specifically:
- Applicants cannot use control over their transmission systems to thwart sales under the power sales agreements. The Independent Monitor will report within three business days any hours in which buyers did not purchase the full amount of energy Applicants are required to deliver under the power sales agreements.
- Applicants cannot have any priority right over other potential buyers to re-purchase any of the energy and/or capacity sold by Applicants pursuant to the power sales agreements.
- Applicants must not enter into transactions with the counterparties to the power sales agreements except on a spot (day-ahead or shorter) basis.
- For the duration of the power sales agreements, Applicants must either limit the price they pay for new purchases of natural gas to the price reported in Platts Gas Daily for Transco Zone 5 to the index price or replace Transco Zone 5 with Transco Zone 4.
- On each occasion when Applicants sell power under the power sales agreements, Applicants must simultaneously post on their electronic bulletin boards the amount of power that was sold under the Power Sales Agreement(s) and for what duration.
- Applicants must expand the scope of the Independent Monitor’s duties to include monitoring the purchases made under the Power Sales Agreements on a daily, ongoing basis. Applicants must also expand the scope of the reports the Independent Monitor is required to submit to the Commission. Applicants must notify the Independent Monitor within two business days, and the Independent Monitor must notify the Commission within three business days if a buyer sells to either Duke Energy Carolinas or Progress Energy Carolinas in the Duke Energy Carolinas and/or Progress Energy Carolinas BAAs an amount of energy or capacity equal to or more than five percent of the amount of such energy or capacity purchased by the buyer under the Power Sales Agreement.
- Applicants must hold transmission and wholesale requirements customers harmless from losses that Applicants may incur under the power sales agreements.
In addition, in order to ensure that the Applicants are moving toward completing the Transmission Expansion Projects, Applicants must provide the Commission with copies of all binding agreements needed to construct the Transmission Expansion Projects, as negotiated with American Electric Power and Dominion Virginia Power, within 15 days. The Commission also required an Independent Monitor to provide periodic reports on the status of the Transmission Expansion Projects, beginning no later than the last day of the third full month after the proposed transaction is consummated. Finally, the Applicants must hold transmission and wholesale requirements customers harmless from the costs of the Transmission Expansion Projects.
A copy of the Commission’s June 9th Order is available here.