UPDATE 1-Duke, Progress push new power market plan

Feb 22 (Reuters) - Duke Energy Corp and Progress Energy Inc said on Wednesday they will build new electricity lines and sell power to competitors under a new proposal to reduce their market power in a bid to win regulatory approval for their planned merger.

The two companies, whose previous proposal was rejected by federal regulators, said the combined company would spend between $75 million and $150 million to build new electricity transmission lines to foster competition in North Carolina's wholesale power market.

During the three-year period during which those lines would be built, the combined company would sell hundreds of megawatts of electricity to new market participants, Duke and Progress said in a joint statement.

Duke's proposed $13.7 billion purchase of Progress was blocked by the Federal Energy Regulatory Commission in December after the regulator ruled the proposal did not go far enough to reduce the companies' market power.

The FERC could rule on the new proposal within about 60 days, after a period of consultation with the companies. Regulators in both North and South Carolina will also review the plan.

Duke submitted a proposal to the FERC in November that called for the "virtual divestiture" of some generating assets in the Carolinas in which the company would sell power at cost for eight years. But the FERC has suggested those power plants be sold, a move opposed by Duke, as well as state power regulators in North Carolina.