Duke, Progress file revised power mitigation plan for merger

Duke Energy (NYSE: DUK) and Progress Energy (NYSE: PGN) filed a revised wholesale market power mitigation plan with the Federal Energy Regulatory Commission (FERC) as part of their proposed merger, expected to close the first week of July 2012.

The plan provides more details on the notice of intent to file a mitigation plan submitted to the North Carolina Utilities Commission (NCUC) on Feb. 22. It requests that FERC issue orders approving the mitigation plan, the Joint Dispatch Agreement and the Joint Open Access Transmission Tariff within 60 days of the filing, and no later than June 8, 2012. The FERC filing also features a permanent mitigation plan with seven transmission projects, estimated to cost $110 million.

The companies intend to seek final merger-related approvals from the NCUC and the Public Service Commission of South Carolina (PSCSC) prior to the July 8, 2012, merger agreement termination date. For planning purposes, the companies are targeting closing the merger on July 1.

The NCUC must also approve the merger and the Joint Dispatch Agreement in the Carolinas. The PSCSC must approve the Joint Dispatch Agreement.

The proposal also features a two-to-three-year interim mitigation plan with must-deliver, must-take power purchase agreements (PPAs) signed with Cargill Power Markets LLC; EDF Trading North America LLC; and Morgan Stanley Capital Group Inc. The companies will 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 agreements, or similar power purchase agreements, will be in place from the date the merger closes until the transmission projects are operational.

Potomac Economics will serve as Independent Monitor of the interim PPAs and a component of the permanent mitigation plan.

To date, the companies have received merger-related approvals from, or met the requirements of the U.S. Nuclear Regulatory Commission, Kentucky Public Service Commission, and the shareholders of both companies. The companies have also met their obligations with the U.S. Department of Justice under the Hart-Scott-Rodino Act.

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