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Duke to pay $3.5M to settle charges it misled FERC in merger-related filing

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Duke to pay $3.5M to settle charges it misled FERC in merger-related filing

The Federal Energy Regulatory Commission has signed off on a settlement resolving agency staff's investigation into allegations that Duke Energy Corp. submitted a filing containing "erroneous and intentionally misleading data" related to its 2012 merger with Progress Energy Inc.

Under its deal with FERC enforcement staff, Duke agreed to pay a $3.5 million civil penalty to settle the probe. That investigation was launched after the commission received an anonymous letter claiming that a Duke compliance filing aimed at addressing the agency's concerns over the merger's impact on competition "contained 'three pieces' of 'erroneous' data that were 'intended to mislead.'"

Although Duke acknowledged that the results of transmission studies submitted in support of its merger application were impacted by two "questionable" assumptions and an engineer's programming error, the company neither admitted nor denied that it violated FERC's market behavior rules governing communications, as staff alleged.

Duke and Progress submitted the filing at issue to FERC in March 2012, after the agency rejected their plan for mitigating market power concerns associated with their plan to combine (FERC docket EC11-60) and create a $37 billion utility powerhouse. Under the revised plan, which FERC accepted in June 2012, the companies pledged to spend about $110 million on seven previously unplanned transmission projects to mitigate the merger's competitive impacts.

But according to the settlement agreement and FERC's order (FERC docket IN15-6) approving it, the anonymous letter, which was sent to the commission soon after the merger was approved, prompted Duke to undertake an independent review that resulted in the company offering to implement additional mitigation measures. While FERC accepted that offer in October 2014, it also referred the matter to agency enforcement staff for further inquiry.

Staff's subsequent investigation determined that Duke's revised mitigation plan violated FERC's rules by "failing to fully and accurately describe" both the way phase shifters were modeled in Progress Energy Carolinas' transmission studies and the methodology used for calculating available transmission capacity at the Duke to Progress Energy Carolinas-East interface, the June 8 FERC order explained.

The commission found the settlement to be in the public interest as it "reflects the nature and seriousness of the conduct." In addition to the $3.5 million civil penalty to be paid to the U.S. Treasury, Duke agreed to submit annual compliance monitoring reports for two years.