In re Application of Duke Energy Corp. & Progress Energy, Inc.

NO. COA13-566

NORTH CAROLINA COURT OF APPEALS

Filed: 4 March 2014

IN THE MATTER OF:
APPLICATION OF DUKE ENERGY
CORPORATION AND PROGRESS ENERGY,
INC., TO ENGAGE IN A BUSINESS
COMBINATION TRANSACTION AND TO
ADDRESS REGULATORY CONDITIONS AND
CODES OF CONDUCT

N.C. Utilities Commission
Nos. E-2, Sub 998
E-7, Sub 986

Appeal by City of Orangeburg, South Carolina and N.C. Waste

Awareness and Reduction Network from order entered 29 June 2012

by the N.C. Utilities Commission. Heard in the Court of Appeals

6 November 2013.

Allen Law Offices, PLLC, by Dwight W. Allen, Britton H.
Allen, and Brady W. Allen; Duke Energy Corporation Deputy
General Counsel Lawrence B. Somers; and Womble Carlyle
Sandridge & Rice, LLP, by James P. Cooney, III, for
Appellee Duke Energy Corporation.

Spiegel & McDiarmid, LLP, by James N. Horwood and Peter J.
Hopkins, pro hac vice; and Schiller & Schiller, PLLC, by
David G. Schiller, for Intervenor-Appellant City of
Orangeburg, South Carolina.

The Law Offices of F. Bryan Brice, Jr., by Matthew D.
Quinn; and John D. Runkle, for Intervenor-Appellant N.C.
Waste Awareness Reduction Network.

Public Staff Chief Counsel Antoinette R. Wike and Staff
Attorney Gisele L. Rankin, for Appellee Public Staff-North
Carolina Utilities Commission.
 -2-

McCULLOUGH, Judge.

Intervenors City of Orangeburg, South Carolina

(“Orangeburg”) and N.C. Waste Awareness and Reduction Network

(“NC WARN”) appeal from order of the N.C. Utilities Commission

(the “Commission”) entered 29 June 2012. For the following

reasons, we affirm the Commission’s order and dismiss

Orangeburg’s appeal.

I. Background

In accordance with N.C. Gen. Stat. § 62-111(a), on 4 April

2011, Duke Energy Corporation (“Duke”) and Progress Energy, Inc.

(“Progress”) (collectively the “applicants”) submitted an

application to the Commission for authorization to: “engage in

a business combination transaction; revise and apply Duke Energy

Carolinas, LLC’s (“DEC”) Regulatory Conditions and Code of

Conduct to Progress and Progress Energy Carolinas, Inc. (“PEC”);

and nullify PEC’s Regulatory Conditions and Code of Conduct.”

DEC and PEC, wholly-owned subsidiaries of Duke and Progress,

respectively, are electric utilities organized, existing, and

operating under the laws of the State of North Carolina.

Pursuant to the terms of the Agreement and Plan of Merger (the

“merger agreement”) entered into by the applicants and attached
 -3-
to the application as Exhibit 1, the business combination

transaction (the “merger”) would occur at the holding company

level with Diamond Acquisition Corporation, a wholly-owned

subsidiary of Duke, merging with and into Progress with the

result that Progress survives the merger as a wholly-owned

subsidiary of Duke.1 Progress and PEC would remain separate

legal entities following the merger, with the plan that PEC and

DEC would merge into a single legal entity in the future.

On 27 April 2011, the Commission entered an Order

Scheduling Hearing, Establishing Procedural Deadlines, and

Requiring Public Notice. By the terms of the order, a

Commission hearing on the application was scheduled to begin on

20 September 2011.

In the interim, the Commission allowed the intervention of

thirty-seven (37) different parties, including the Commission’s

public staff and appellants NC WARN and Orangeburg. Regarding

appellants, NC WARN filed a petition to intervene on 27 May 2011

that the Commission granted by order entered 7 June 2011;

Orangeburg filed a petition to intervene on 5 August 2011 that

the Commission granted by order entered 12 August 2011. Also in

the interim, on 2 September 2011, the applicants and the public

1
Duke would acquire all issued and outstanding common stock of
Progress in exchange for Duke common stock.
 -4-
staff entered into an agreement and stipulation of settlement

(the “Stipulation”) for consideration by the Commission pursuant

to N.C. Gen. Stat. § 62-69.

By Commission order entered following a pre-hearing

conference on 19 September 2011, the application, certain

exhibits, the revised Joint Dispatch Agreement, the Stipulation,

and the corrected Regulatory Conditions and Code of Conduct were

admitted into evidence as if introduced at the hearing on the

application set to begin the following day.

The Commission hearings on the application then began as

scheduled on 20 September 2011. The hearings lasted three days,

concluding on 22 September 2011. A supplemental hearing was

later held on 25 June 2012.

On 27 June 2012, NC WARN filed an offer of proof alleging

that many facts relevant to the merger had changed significantly

since the September 2011 hearings and, therefore, the Commission

should reopen the hearing process. The Commission, however,

determined the offer of proof was defective and on 29 June 2012

entered an Order Approving Merger Subject to Regulatory

Conditions and Code of Conduct (the “merger order”). In the

merger order, which includes 41 findings of fact and over 80

pages of analysis discussing the evidence and reasoning
 -5-
supporting the findings, the Commission stated its conclusions

as follows:

The Commission concludes that the
Stipulation, Regulatory Conditions, Code of
Conduct, Supplemental Stipulation, as
amended, guaranteed fuel and fuel-related
savings, Applicants’ contributions to
various work force development, low-income
assistance, environmental and charitable
programs, and the potential for future
merger cost savings for ratepayers are
sufficient to ensure that: (1) the merger
will have no adverse impact on the rates and
service of DEC’s and PEC’s North Carolina
retail ratepayers; (2) DEC’s and PEC’s North
Carolina retail ratepayers are protected as
much as reasonably possible from potential
costs and risks resulting from the merger;
and (3) there are sufficient benefits from
the merger to offset the potential costs and
risks. Therefore, the Commission further
concludes that the proposed business
combination between Duke and Progress is
justified by the public convenience and
necessity.

In accordance with the terms of the merger order, the

applicants filed a statement notifying the Commission they

accepted and agreed with all terms, conditions, and provisions

of the merger order on 2 July 2010, the same day the merger was

finalized.

On 26 July 2012, NC WARN filed a motion for reconsideration

of the merger order. The Commission denied NC WARN’s motion by

order entered 10 December 2012.
 -6-
Orangeburg and NC WARN appealed from the merger order to

this Court.2

II. Discussion

NC WARN and Orangeburg raise distinct issues on appeal. On

the one hand, NC WARN challenges the merger as a whole, claiming

there is not substantial evidence to support the Commission’s

decision to approve the merger. On the other hand, Orangeburg

challenges the constitutionality of certain regulatory

conditions imposed in connection with the Commission’s approval

of the merger. We address these issues separately.

A. Standard of Review

The scope of this Court’s review of a Commission decision

is governed by statute. As our Supreme Court has recognized,

“‘[t]he decision of the Commission will be upheld on appeal

unless it is assailable on one of the statutory grounds

enumerated in [N.C. Gen. Stat. §] 62–94(b).’” State ex rel.

Utilities Com'n v. Cooper, 366 N.C. 484, 490, 739 S.E.2d 541,

545 (2013) (quoting State ex rel. Utilities Com'n v. Carolina

2
NC WARN also appealed from the Commission’s denial of its motion
for reconsideration. The issues related to the denial of NC
WARN’s motion for reconsideration, however, were dismissed by
the Commission on 29 April 2013 following Duke’s 7 March 2013
motion to dismiss.
 -7-
Utility Customers Ass'n (CUCA I), 348 N.C. 452, 459, 500 S.E.2d

693, 699 (1998)). N.C. Gen. Stat. § 62-94(b) provides:

So far as necessary to the decision and
where presented, the court shall decide all
relevant questions of law, interpret
constitutional and statutory provisions, and
determine the meaning and applicability of
the terms of any Commission action. The
court may affirm or reverse the decision of
the Commission, declare the same null and
void, or remand the case for further
proceedings; or it may reverse or modify the
decision if the substantial rights of the
appellants have been prejudiced because the
Commission's findings, inferences,
conclusions or decisions are:

(1) In violation of constitutional
provisions, or

(2) In excess of statutory authority or
jurisdiction of the Commission, or

(3) Made upon unlawful proceedings, or

(4) Affected by other errors of law, or

(5) Unsupported by competent, material and
substantial evidence in view of the
entire record as submitted, or

(6) Arbitrary or capricious.

N.C. Gen. Stat. § 62-94(b) (2013). As explained by our Supreme

Court,

“[t]his Court's role under section 62–94(b)
is not to determine whether there is
evidence to support a position the
Commission did not adopt. Instead, the test
upon appeal is whether the Commission's
findings of fact are supported by competent,
 -8-
material and substantial evidence in view of
the entire record. Substantial evidence [is]
defined as more than a scintilla or a
permissible inference. It means such
relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.
The Commission's knowledge, however expert,
cannot be considered by this Court unless
the facts and findings thereof embraced
within that knowledge are in the record.
Failure to include all necessary findings of
fact is an error of law and a basis for
remand under section 62–94(b)(4) because it
frustrates appellate review.”

Cooper, 366 N.C. at 490-91, 739 S.E.2d at 545 (quoting CUCA I,

348 N.C. at 460, 500 S.E.2d at 699–700 (alteration in original)

(citations and internal quotation marks omitted)); see also

State ex rel. Utilities Com’n v. Village of Pinehurst, 99 N.C.

App. 224, 226, 393 S.E.2d 111, 113 (1990) (“[T]he essential test

to be applied is whether the Commission’s order is affected by

errors of law or is unsupported by competent, material, and

substantial evidence in view of the entire record as

submitted.”). Yet, “[u]pon any appeal, . . . any . . . finding,

determination, or order made by the Commission . . . shall be

prima facie just and reasonable.” N.C. Gen. Stat. § 62-94(e).

B. NC WARN’s Appeal

NC WARN is a not-for-profit corporation with members across

North Carolina that, according to its motion to intervene, seek

“to reduce hazards to public health and the environment from
 -9-
nuclear power and other polluting electricity production through

energy efficiency and renewable energy resources.” In this

case, NC WARN was allowed to intervene to advocate that the

Commission investigate the public convenience and necessity of

the merger and to address its members’ concerns regarding the

merger’s potential impacts on the cost of electricity, renewable

energy projects, and energy efficiency programs.

Now on appeal, NC WARN contends the Commission erred in

approving the merger because there was insufficient evidence to

support approval. Specifically, NC WARN argues: (1) the

applicants failed to submit evidence of the risks posed by the

merger; (2) there is no evidence the merger will result in

benefits to the public; and (3) the merger is not justified by

the public convenience and necessity.

As provided in the Public Utilities Act, “[n]o . . . merger

or combination affecting any public utility [shall] be made

through acquisition or control by stock purchase or otherwise,

except after application to and written approval by the

Commission, which approval shall be given if justified by the

public convenience and necessity.” N.C. Gen. Stat. § 62-111(a)

(2013). Since 2000, the Commission has required that applicants

submit market-power and cost-benefit analyses as part of an
 -10-
application for an electric utility merger. See Order Requiring

Filing of Analyses, Docket No. M-100, Sub 129, at 7 (2 November

2000) (the “Sub 129 Order”).

1. Merger Risks

NC WARN first argues that neither the application nor

applicants addressed the risks posed by the merger, as required

by the Sub 129 Order. We disagree. Although there was no

specific document titled cost-benefit analysis, we find there

was sufficient consideration of the risks of the merger.

In approving the merger, the Commission explicitly found

“[t]he Applicants . . . are in compliance with the filing

requirements established in the Sub 129 Order with respect to

the market power and cost-benefit analyses submitted with the

application.” This finding reiterated a prior 27 April 2011

Commission order concluding the application satisfied the filing

requirements of the Sub 129 order.

Upon review of the record, we hold there was substantial

evidence to support the Commission’s approval where, in addition

to the application, the applicants submitted investment analyses

from three different financial institutions, an analysis of the

economic efficiencies under joint dispatch, a fuel synergies

review, and a market power study, among other exhibits.
 -11-
Despite recognition of the analyses submitted by the

applicants, NC WARN argues the analyses only examined the

potential benefits of the merger and did not constitute a

comprehensive cost-benefit analysis. We hold that the

Commission adequately addressed this argument in discussing its

finding that the applicants met the filing requirements of the

Sub 129 Order. In the merger order, the Commission noted,

“[t]he purpose of such analyses is to assist the Commission in

determining whether or not a merger meets the statutory standard

for approval.” The Commission then explained,

[t]he Applicants stated in the application
that the actual integration of Duke and
Progress and their service companies is
expected to produce cost savings in addition
to those identified in the Compass Lexecon
Study and the Fuel Synergies Review and that
there will be upfront costs associated with
achieving these savings. The fact that the
application did not include a quantification
of the costs and benefits associated with
these non-fuel savings, along with the
exhibits quantifying direct and immediate
fuel savings, does not constitute a filing
deficiency insofar as the Sub 129 Order is
concerned. Moreover, as discussed . . . ,
the record contains ample evidence regarding
the Applicants’ estimates of both fuel and
non-fuel savings to support a decision as to
whether the merger meets the statutory
standard for approval.
 -12-
We find it evident from a review of the merger order that the

Commission had sufficient evidence to determine whether the

merger was justified by the public convenience and necessity.

Throughout the merger order, the Commission weighed and

balanced the benefits of the merger with the known and potential

costs and risks of the merger. Specifically, in Finding of Fact

22, the Commission documented the potential costs and risks to

retail ratepayers that it considered.

Known and potential costs and risks of the
merger to North Carolina retail ratepayers
include direct merger costs and other
merger-related cost increases that could
impact North Carolina retail rates; the
potential for preemption of the Commission’s
regulatory authority under the FPA,
particularly as it relates to the JDA and
the Joint OATT, and under the Public Utility
Holding Company Act of 2005 (PUHCA 2005);
potential adverse effects on DEC and PEC of
transactions within the holding company
family and the resulting need for increased
regulatory oversight of such transactions,
including the treatment of joint dispatch
costs and savings; the potential for DEC and
PEC to unreasonably favor their unregulated
affiliates over nonaffiliated suppliers of
goods and services; potential adverse
impacts on DEC’s and PEC’s cost of capital;
the exposure of DEC, PEC, and their
respective retail ratepayers to costs and
risks associated with Duke, Progress, and
their subsidiaries; and the potential for
DEC’s and PEC’s quality of service to
deteriorate because of increased management
focus on cost savings and earnings growth.
 -13-
In identifying these costs and risks, the Commission noted that

“[t]he known and potential costs and risks to North Carolina

retail ratepayers from a merger affecting one or more regulated

electric utilities have been well documented in prior merger

proceedings.” The Commission further found, however, that

despite these costs and risks, the retail ratepayers were

adequately protected by the Regulatory Conditions and

Stipulation approved by the Commission with the merger.

Although no single document entitled cost-benefit analysis

was presented by the applicants quantifying the known and

potential costs and risks of the merger, we hold there was

sufficient evidence of the costs, considering the benefits and

protections afforded to retail ratepayers, to allow the

Commission to determine that the merger met the statutory

standard for approval.

2. Public Benefit

NC WARN also argues that there is no evidence that the

merger will result in benefits to the public. NC WARN instead

maintains that the benefits resulting from the merger accrue

solely to the benefit of the emerging entity. We disagree.
 -14-
Based on claims in the application and supporting evidence

in the analysis of economic efficiencies under joint dispatch

and fuel synergies review, the Commission found,

[t]he primary quantifiable benefits of the
merger to North Carolina retail ratepayers
consist of an estimated $364.2 million in
total system fuel and fuel-related cost
savings over the five-year period 2012
through 2016 through joint dispatch of DEC’s
and PEC’s generation assets and an
additional estimated $330.7 million in total
system fuel and fuel-related system cost
savings through sharing and implementing
best practices for fuel procurement and use
over the same five-year period.

These savings in turn benefit the ratepayers. As further found

by the Commission,

[t]he Stipulation [agreed upon by the
applicants and the public staff] guarantees
that North Carolina retail ratepayers will
receive their allocable share of $650
million of these cost savings, as well as a
small amount of non-fuel operations and
maintenance (O&M) cost savings, over five
years through DEC’s and PEC’s annual fuel
clause proceedings. . . . Further, if the
fuel and fuel-related savings achieved by
DEC and PEC exceed the guaranteed $650
million during the first five years after
the merger, then North Carolina ratepayers
will receive their allocable share of the
additional savings.

NC WARN does not dispute the fuel cost savings on appeal,

but contends the savings are temporary, are not a product of the

merger, and are diminished by settlements to allocate fuel
 -15-
savings to wholesale customers. We are unpersuaded by NC WARN’s

contentions.

First, the fact that the savings are only guaranteed over

the first five years does not diminish the benefit of the

guaranteed savings to retail ratepayers. Second, the fuel

savings are a product of the merger. As the Commission

explained, the fuel cost savings “are the result of using the

lower cost resources of each company to displace the higher cost

resources of the other depending on the marginal cost of

production of each utility’s available resources in a given

hour.” Without the merger, these savings from joint dispatch

would not be possible. Similarly, without the merger, it is

unlikely the savings from the implementation of best practices

for fuel procurement and use would be realized because companies

do not usually share their proprietary skills and practices with

unaffiliated entities. Third, we are unconvinced that the

savings to retail ratepayers will be diminished by settlements

with wholesale customers. As the Commission noted, there was

testimony that “the settlement agreements between the Applicants

and parties other than the Public Staff were considered by the

Public Staff in its negotiations of its settlement with the

Applicants.” Furthermore, the Commission ultimately sets retail
 -16-
rates and the Commission is not bound by the terms of those

settlement agreements.

In addition to the quantifiable fuel cost savings, the

Commission also found that “substantial non-fuel O&M cost

savings are expected to result from the integration of Duke and

Progress over the long term.” As explained by the Commission,

this finding is supported by an internal study on merger

integration savings and witness testimony that a major source of

the O&M savings is lower payroll costs resulting from the

elimination of duplicate positions.

Lastly, in addition to the fuel and non-fuel cost savings,

the Stipulation provides that DEC and PEC will make annual

community support and charitable contributions of at least $9.2

million and $7.28 million, respectively, in their service areas

over four years and contribute $15 million for workforce

development and low income energy assistance during the first

year following the merger. Additionally, the merger order

requires DEC and PEC to contribute $2 million to NC GreenPower.

Considering the significant guaranteed fuel cost savings

and potential non-fuel cost savings, as well as the commitments

by DEC and PEC to contribute funds to support the community,

workforce development, and low income energy assistance, we hold
 -17-
there was substantial evidence before the Commission that the

merger will result in benefits to the public.

3. Public Convenience and Necessity

In NC WARN’s third argument, NC WARN contends the merger is

not justified by public convenience and necessity for three

reasons: (1) the merger allows the applicants to manipulate

prices and harm local markets; (2) the merger will result in job

losses; and (3) the merger harms low income families. It is

evident from the merger order that the Commission considered

each of these concerns; nevertheless, the Commission found the

merger justified by public convenience and necessity. Upon

review, we affirm the Commission.

Monopsony

NC WARN first argues the merger contradicts the public

convenience and necessity because it is likely to create a

monopsony, “a market situation in which one buyer controls the

market.” Black’s Law Dictionary 1023 (7th ed. 1999). NC WARN

contends this control could allow the buyer to manipulate

prices, harming local markets, such as the market for renewable

energy. NC WARN further contends that based on uncontroverted

witness testimony concerning the potential for a monopsony

following the merger, the Commission should have concluded “the
 -18-
merger will harm [local markets] within North Carolina – such as

renewable energy markets – and therefore the merger cannot be in

the public convenience and necessity.”

While we acknowledge the potential of a monopsony was

raised in testimony provided during the Commission hearing, we

find the Commission adequately addressed the issue in the merger

order. In explaining the potential costs and risks of the

merger enumerated in Finding of Fact 22, the Commission

specifically addressed the testimony of Richard S. Hahn, noting

“Hahn testified that a result of the merger would be market

dominance by the merged entities with regard to the procurement

of renewable energy, leading to unaffiliated renewable energy

developers foregoing North Carolina development activities.”

Yet, after considering the rebuttal testimony of B. Mitchell

Williams, the Commission was not persuaded that the merger would

negatively impact the market for renewable energy. The

Commission reasoned,

PEC and DEC are required to meet their
[Renewable Energy and Energy Efficiency
Standards (“REPS”)] renewable energy
obligations in the least cost manner. In
doing so, they minimize the rate impact to
their customers of complying with this
statutory mandate. In addition, to the
extent the merger allows PEC and DEC to
lower their REPS compliance costs through
more efficient resource procurement
 -19-
procedures, this will be a direct benefit to
their North Carolina customers.

The Commission further explained,

following the close of the merger DEC and
PEC will each continue to have the same
obligations they had before the merger to
refrain from favoring or subsidizing their
affiliates, to pursue the most reliable,
prudent and cost-effective resources and
projects, and to demonstrate that they have
done so in appropriate proceedings before
the Commission[.]

Upon review, we hold the Commission’s analysis is supported

by Williams’ testimony and the governing statutes, N.C. Gen.

Stat. §§ 62-133.8(b) and 62-133.9(b).

Job Losses

NC WARN also argues the merger contradicts the public

convenience and necessity because it results in job losses. NC

WARN specifically points to the testimony of James Rogers,

William D. Johnson, and Paula Sims to emphasize the applicants’

plan to terminate 2,000 or more jobs (approximately 6.7% of the

applicants’ workforce) as a consequence of the merger. NC WARN

argues that “[t]hese job losses, in a time of economic crisis,

weigh strongly against the merger of Duke and Progress.”

We agree the job losses weigh against the public

convenience and necessity; yet, the number of jobs lost must not

be considered in isolation.
 -20-
Although 2,000 or more jobs were expected to be lost as a

result of the merger, the evidence before the Commission tended

to show that a majority of these job reductions would occur

through retirement, normal attrition, and voluntary severance.

Furthermore, witness testimony reassured the Commission that

these reductions would not affect the quality, safety, and

reliability of DEC and PEC service because the majority of the

reductions would occur in corporate functions, rather than

operational functions. Testimony also provided that retained

employees would benefit from the merger as a result of a larger,

more diverse company with better career opportunities,

compensation, and benefits.

It is evident from the merger order that the Commission

considered the number of jobs lost, the manner in which the

workforce was reduced, the benefits to the retained employees,

and the potential benefits to retail ratepayers as a result of

savings expected to be realized from lower payroll costs in its

determination that the merger was justified by the public

convenience and necessity. It is not this Court’s role to

second guess the determination of the Commission where its

findings and conclusions are supported by the evidence.

Low-Income Families
 -21-
In NC WARN’s final argument, NC WARN argues the merger

contradicts the public convenience and necessity because it

harms low-income families. Specifically, NC WARN relies on the

testimony of Roger D. Colton and contends the merger will

eliminate the individualized customer service on which low-

income families rely to manage the costs of electricity.

It is evident from the merger order that the Commission

considered Colton’s testimony but was unpersuaded. The

Commission explained,

[t]he Commission determines that the needs
of low-income customers to manage their
energy usage and be financially able to pay
their bills are undeniably real and
substantial, and the agencies and
individuals who are committed to addressing
those needs, particularly in times of
economic hardship and high unemployment,
have a considerable undertaking to manage.
However, the Commission does not agree with
witness Colton that the merger will
adversely affect those customers or that
conditions of the merger approval should be
a major vehicle for addressing their energy
needs.

The Commission was persuaded, however, “that the Applicants’

commitments in the proposed Regulatory Conditions, along with

the Commission’s Rules and Regulations and monitoring by the

Commission and the Public Staff, are sufficient to ensure that

there is no diminution of resources to assist low-income

customers and other customers of DEC and PEC.”
 -22-
Upon review of Williams’ rebuttal testimony, we hold the

Commission’s analysis is supported by the evidence. In

rebuttal, Williams testified that Colton’s concerns were

speculative and “that this merger will do absolutely nothing to

impair or modify [the] Commission’s jurisdiction, consumer

protection authority or regulatory control over the combined

company.” Specifically, Williams identified numerous Commission

Rules and Regulatory Conditions that ensure quality customer

service. Williams further testified the merger would not affect

the discretion of customer service representatives and would not

constrain the range of options available to customer service

representatives assisting low income families manage payments.

NC WARN further contends that the payment of $15 million

dollars by DEC and PEC within the first year following the

merger is inadequate to remedy the harm to low income families

resulting from the merger. NC WARN instead asserts that the

Commission should have required the applicants to pay $270

million, $27 million per year for 10 years, as recommended by

Colton. We disagree.

As stated above, the Commission was clear that it did not

agree with Colton’s analysis. Although there is no direct

evidence to link the $15 million payment to the harm to low-
 -23-
income families, we hold the Commission did not err in approving

the payment. As the Commission noted, the merger approval

should not be the vehicle to address the energy needs of low

income families. The statutory requirement for merger approval

is that the merger is justified by the public convenience and

necessity. Here, the $15 million dollar payment agreed to in

the Stipulation is just a portion of the economic benefits to

low income families, who also benefit from the $650 million in

guaranteed savings to retail ratepayers.

Where it is evident that the Commission considered the

potential costs and risks of the merger and weighed them against

the anticipated benefits, and where there is substantial

evidence supporting the Commission’s findings and conclusions,

we will not second guess the Commission’s determination that the

merger is justified by the public convenience and necessity.

Thus, we affirm the Commission’s approval of the merger in the

merger order.

C. Orangeburg’s Appeal

Orangeburg, through its Department of Public Utilities,

provides electric services to approximately 25,000 residential,

industrial, and commercial customers in the City of Orangeburg

and Orangeburg County. With a generation capacity of only 23.5
 -24-
megawatts and a growing total peak load of over 180 megawatts,

Orangeburg is reliant on wholesale purchases of power to meet

the needs of its customers.

When the Commission entered the merger order, the

Commission approved the application “subject to the provisions

of [the merger order] and the Regulatory Conditions and Code of

Conduct[.]” Just as Orangeburg argued before the Commission,

Orangeburg, as “a potential wholesale power customer of Duke or

Progress and a competitor for industrial load with utilities in

the Southeastern United States[,]” challenges Regulatory

Conditions 3.6, 3.7, and 3.9 on appeal.

In short, these Regulatory Conditions provide the

following: (1) DEC and PEC “shall continue to serve [their]

Retail Native Load Customers with the lowest-cost power it can

reasonably generate or obtain . . . before making power

available for sales to customers that are not entitled to the

same level of priority[;]” (2) DEC and PEC shall give written

notice to the Commission prior to “execut[ing] any contract that

grants Native Load Priority to a wholesale customer” other than

the historically served wholesale customers recognized by the

Commission; and (3) “[t]he Commission retains the right to

assign, allocate, impute, and make pro-forma adjustments with
 -25-
respect to the revenues and costs associated with both DEC’s or

PEC’s wholesale contracts for retail ratemaking and regulatory

accounting and reporting purposes.”

Orangeburg argues these Regulatory Conditions effectively

restrict the sale of low cost wholesale power to certain

Commission-favored wholesale customers in violation of the

Commerce Clause and Supremacy Clause of the U.S. Constitution.

As a result, Orangeburg, which is not one of the Commission-

favored wholesale customers, contends it is competitively

disadvantaged and will not receive competitive offers to

purchase wholesale power in the future.

Below, the Commission considered these same arguments;

nevertheless, the Commission approved the merger subject to the

Regulatory Conditions finding,

[t]he Commission-approved Regulatory
Conditions effectively protect as much as
reasonably possible the Commission’s
jurisdiction as a result of the merger,
including risks related to agreements and
transactions between and among DEC, PEC, and
their affiliates, including the JDA;
financing transactions involving Duke, DEC,
or PEC, and any other affiliate; the
ownership, use and disposition of assets by
DEC or PEC; participation in the wholesale
market by DEC or PEC; and filings with
federal regulatory agencies. In addition
they insulate DEC’s and PEC’s retail
ratepayers as much as reasonably possible
from any adverse consequences potentially
 -26-
resulting from the merger.

In fact, in discussing the evidence and conclusions supporting

the above finding, the Commission specifically addressed

Orangeburg’s challenges to Regulatory Conditions 3.6, 3.7, and

3.9, noting that “[t]he Commission, the North Carolina appellate

courts[,] and FERC have been confronted by Orangeburg’s

arguments or by similar arguments by others on previous

occasions.” Following a discussion of these prior occasions,

the Commission then explicitly rejected Orangeburg’s challenges.

“The Commission [further] determine[d] that Orangeburg lacks

standing at this time and in these dockets to raise these issues

and alternatively that Orangeburg’s arguments as they

contemplate potential future harm are not ripe for

consideration.”

Upon review, we agree with the Commission’s analysis; yet,

we do not reach the merits of Orangeburg’s challenges to the

Regulatory Conditions on appeal because we hold Orangeburg lacks

standing to appeal the merger order. Therefore, we dismiss

Orangeburg’s appeal.

N.C. Gen. Stat. § 62-90 provides that a “party aggrieved”

by a final Commission order or decision has standing to appeal.

N.C. Gen. Stat. § 62-90(a) (2013). “Generally, ‘a “party

aggrieved” is one whose rights have been directly and
 -27-
injuriously affected by the judgment entered[.]’” State ex rel.

Utilities Com'n v. Carolina Utility Customers Ass'n, Inc. (CUCA

II), 163 N.C. App. 1, 10, 592 S.E.2d 277, 282 (2004) (quoting

Hoisington v. ZT-Winston-Salem Assocs., 133 N.C. App. 485, 496,

516 S.E.2d 176, 184 (1999) (citations omitted)). In this case,

we hold Orangeburg is not a party aggrieved at this time.

In January 2011, Orangeburg entered into a wholesale power

supply agreement with S.C. Electric & Gas Co. (“SCE&G”) to

purchase its power requirements from SCE&G from 1 January 2012

through at least 31 December 2022.3 As a result of this

agreement, Orangeburg is not currently in the market to purchase

wholesale power from DEC or PEC and will not be until it

reenters the market in search of a new agreement several years

before the current agreement expires. Thus, Orangeburg is not

aggrieved by the Regulatory Conditions it challenges.

Furthermore, we find our holding is bolstered by Orangeburg’s

own declaration that it is merely “a potential wholesale power

customer of Duke and Progress.” As the Commission recognized,

there are many variables subject to change prior to the time

Orangeburg is back in the wholesale market.

3
The wholesale power supply agreement between Orangeburg and
SCE&G provided SCE&G an option to extend the agreement through
31 December 2023.
 -28-
Despite its contract to purchase wholesale power from SCE&G

through at least 31 December 2022, Orangeburg argues it has

standing to challenge the regulatory conditions because the

Commission, by allowing it to intervene, necessarily determined

that it had an interest in the merger and a right to be heard.

We are unpersuaded by Orangeburg’s argument.

The standards for intervention and standing are discrete

and distinguishable. Intervention in a Commission proceeding is

governed by Commission Rule 1-19, which provides that “[a]ny

person having an interest in the subject matter of any hearing .

. . before the Commission may become a party thereto . . . by

filing a verified petition with the Commission” that includes,

among other requirements, “[a] clear, concise statement of the

nature of the petitioner’s interest in the subject matter of the

proceeding, and the way and manner in which such interest is

affected by the issues involved in the proceeding.” N.C. Admin.

Code. tit. 4, c. 11, r. 1-19(a) (June 2012). Rule 1-19 further

provides:

[L]eave to intervene filed within the time
herein provided, in compliance with this
rule and showing a real interest in the
subject matter of the proceeding, will be
granted as a matter of course, but granting
such leave does not constitute a finding by
the Commission that such party will or may
be affected by any order or rule made in the
 -29-
proceeding.

N.C. Admin. Code. tit. 4, c. 11, r. 1-19(d) (emphasis added).

On the other hand, and as discussed above, standing is statutory

and requires the party to be aggrieved. See N.C. Gen. Stat. §

62-90(a). As this Court has recognized, “[t]his Court's

interpretation of ‘party aggrieved’ as it relates to an appeal

of an order by the Commission . . . suggests that more than a

generalized interest in the subject matter is required.” CUCA

II, 163 N.C. App. at 10, 592 S.E.2d at 282-83 (citing State ex

rel. Utilities Com’n v. Carolina Utility Customers Ass’n, 104

N.C. App. 216, 408 S.E.2d 876 (1991) (holding CUCA was not an

aggrieved party and dismissing its appeal of an order by the

Commission for lack of standing because CUCA had failed to show

that its interest in person, property, or employment has been

substantially adversely affected, directly or indirectly); State

ex rel. Utilities Com'n v. Carolina Utility Customers Ass'n, 142

N.C. App. 127, 136, 542 S.E.2d 247, 253 (2001) (holding that

CUCA was not a “party aggrieved” and thus, lacked standing to

appeal “because the Commission's order did not impact rates and

because any rate increases [would] be effectuated at subsequent

rates cases”)).

Although Orangeburg may have had an interest in the

proceedings before the Commission, Orangeburg is not currently
 -30-
in the market to purchase wholesale power and, therefore, not

directly and injuriously affected by the Regulatory Conditions

approved by the Commission at this time. Thus, we hold

Orangeburg is not an aggrieved party and dismiss its appeal for

lack of standing. Additionally, although we dismiss

Orangeburg’s appeal for lack of standing, we take this

opportunity to note, as did the Commission, that regulatory

conditions similar to those challenged by Orangeburg have been

upheld by the Commission, this Court, and FERC in prior cases.

See State ex. re. Utilities Com’n v. Carolina Power & Light Co.,

359 N.C. 516, 614 S.E.2d 281 (2005).

III. Conclusion

For the reasons discussed above, we hold the Commission did

not err in determining the merger was justified by the public

convenience and necessity and, therefore, affirm the

Commission’s approval of the merger. Furthermore, having

determined Orangeburg lacks standing to raise a challenge to the

regulatory conditions on appeal, we dismiss Orangeburg’s appeal.

Affirmed in part and appeal dismissed in part.

Judges ELMORE and STEPHENS concur.