Though Duke and Progress Energy have been pursuing a merger for nearly a year, the Federal Energy Regulatory Commission stalled it significantly this Wednesday claiming it would not allow for fair competition in local electricity markets.

The decision, based on FERC’s 1996 Merger Policy Statement, comes at a time of increasing consolidation and specialization in the energy industry and will set a new standard for future merger proposals.

On September 30, FERC authorized the merger, on condition of an adequate mitigation proposal, which was initially submitted to FERC on April 4, 2011. But on Wednesday, FERC said the companies’ merger mitigation proposal is “flawed”: it did not block possible anti-competitive market activity, did not include sufficient oversight of compliance and “does not demonstrate that the mitigation proposal would remedy the market power screen failures identified in the September order.”

Both headquartered in North Carolina Duke and Progress Energy both provide thousands of megawatts of power to millions of customers across the state. Progress serves both the Carolinas and Florida, while Duke serves the Carolinas, and Ohio, Kentucky and Indiana as well.

FERC was careful to note that the proposal had not been blocked and the agency will accept a revised mitigation proposal from the companies without a specific timeline or deadline set.