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An Opportunity in the Duke-Progress Merger

A wrench was thrown into the Duke and Progress Energy merger on Friday by the Federal Energy Regulatory Commission (FERC) which must approve the companies joining together before it can be finalized.  The federal agency wants to hear from the utilities about how they will address “already excessive levels of market concentration.”

This wrench is a huge opportunity for consumers, the renewable energy business and its advocates.  Those concerned about the merger should take full advantage of the uncertain moment and press for changes that will not only look after consumers but also advance energy efficiency and renewable energy to do our part to combat global warming.

Concern over creating the largest utility in the nation has come from diverse constituencies such as NCWARN, the NC Justice Center and the City of New Bern. All have raised serious questions about the impact of the merger on ratepayers, especially in eastern counties where rates are significantly higher than the rest of the state. FERC agreed and the utilities have 60 days to respond.

There are a number of options that could address the market concentration concerns, but which options are the best for consumers and will rapidly advance efficiency and renewables?

  • Sell power plants – this isn’t a likely possibility in the time frame available and given the current pressure to phase out coal-generated power or at a minimum install costly new pollution reduction equipment to save lives and the climate.  Combine that with questions about nuclear power plant safety after the eye-opening response to the earthquake-tsunami in Japan and this option is a no-go.
  • Virtual divestiture – simple as I can put it – retaining ownership of plants while selling the rights to the electricity. If the utility still owns the plant, does this really create the competition that actual divesting would do?
  • Build more transmission lines – this is an expensive possibility, and I suspect the utilities would consider it only if the NC Utilities Commission (NCUC) allowed them to charge customers in advance for the construction.  In 60 days, this is not likely to be resolved.
  • Join a regional transmission organization – again simply put, a regional transmission organization (RTO) administers the grid – across several states – efficiently sending electricity where and when it is needed.  Joining an RTO would open Duke to more electric capacity and revenue, but also more competition. It would also subject Duke’s assets to some strict competition. This could encourage energy efficiency and renewables. This month FERC’s Order 1000 goes into effect to improve transmission planning which was cheered by the renewable energy industry as it will encourage investment in transmission lines to move wind and solar power from the west to power eastern cities, so it’s clear FERC would like to see Duke join a RTO.

Consumer, environmental and public health advocates should push for Duke to join an RTO – that appears to be the best chance to keep rates fair and to utilize efficiency measures and usher in more renewable energy.

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