Federal regulators are blocking Duke Energy’s planned acquisition of Progress Energy to form the country’s largest electric company, ruling the companies haven’t done enough to protect competition in their North Carolina and South Carolina home markets, reports the Associated Press.
The Federal Energy Regulatory Commission had scheduled a Thursday hearing on changes to the merger plans in Washington, but regulators surprised the utilities late Wednesday by rejecting the companies’ solution to protect competition.
The FERC action is likely to delay the merger’s year-end target for completion and could require changes that the companies find unattractive.
A Duke spokesman said the company was reviewing the order. He wouldn’t comment about how it affects Duke’s commitment to the deal.
Jefferies & Co. analyst Paul Fremont said the companies’ next move will be to take a serious look at their power plants and decide which can be sold. Any proposed sale must be reviewed by state regulators, who would need guarantees that it wouldn’t affect pre-negotiated power rates for utility customers.
The order will delay the deal by about three months, at least, he said. The companies also may walk away from the deal at this point, deciding that the government was demanding too many sacrifices. “It’s too early to say at this point” what will happen, Fremont said.
The federal agency in September questioned the deal’s impact on customers in North and South Carolina. Regulators suggested that the companies consider a number of measures that would diminish their influence, such as selling power plants, building new transmission lines or giving up control of their transmission system to a regional operator. The companies responded last month with a plan to sell excess electricity at a fixed price to wholesale buyers in their Carolinas territories.
Regulators now say the proposal by Charlotte-based Duke and Raleigh-based Progress doesn’t go far enough.
The “mitigation proposal does not remedy the proposed transaction’s adverse effects on competition,” the FERC ruling said.
Duke first announced it planned to buy Progress in January for $13.7 billion. If approved, the combined company will serve 7.1 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky.
Duke shares rose 12 cents to $20.97 in premarket trading Thursday while Progress shares added 6 cents to $54.49.