Duke Energy, Progress Energy file wholesale market power mitigation plan

February 29, 2012 — Duke Energy and Progress Energy recently filed a second wholesale market power mitigation plan with the North Carolina Utilities Commission, as part of their proposed merger.

The North Carolina Utilities Commission has up to 30 days to review the mitigation plan before it is filed with the Federal Energy Regulatory Commission, which required mitigation measures to offset market power concerns in the Carolinas, resulting from the proposed merger.

"The intent of this merger is to strike the right balance between the customer and shareholder benefits, and that continues to be our goal," said Jim Rogers, chairman, president and CEO of Duke Energy. "We must also balance the expectations of our state commissions to keep electricity costs low, and the FERC's concerns about market power in the Carolinas. We believe we have done that with this plan."

Officials noted that the revised mitigation plan provides for permanent transmission upgrades and interim power sales. The permanent solution consists of constructing up to eight transmission projects in the Duke Energy and Progress Energy service territories.

These projects will expand the capability to import wholesale power into the Carolinas. The construction would begin after the merger closes and take about three years to complete. The preliminary cost estimate range of these projects is about $75 million to $150 million.

While these projects are being built, the companies propose a three-year plan to sell capacity and firm energy during the summer (June August) and winter (December February) to new market participants.

Together, the companies would sell 800 MW during summer off-peak hours, 475 MW during summer peak hours, 225 MW during winter off-peak hours, and 25 MW during winter peak hours. The companies expect to secure contracts with potential buyers prior to filing the mitigation plan with the FERC.

The companies will be working closely with the North Carolina Public Staff and Office of Regulatory Staff in South Carolina over the next few months on appropriate state ratemaking treatment associated with measures in the revised mitigation plan and other merger-related issues.

Final agreement to the proposed mitigation efforts will be subject to resolution of the state ratemaking issues.

Later this quarter, the companies expect to file the mitigation plan with FERC.

In addition to the market power mitigation plan, FERC must also approve the merger's Open Access Transmission Tariff and Joint Dispatch Agreement in the Carolinas. The North Carolina Utilities Commission must also approve the merger and the Joint Dispatch Agreement. The Public Service Commission of South Carolina must approve the Joint Dispatch Agreement in the Carolinas.

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