Gas Mergers Make It; Electrics Don't
The mergers of Columbia Energy and NiSource Inc. and El Paso Energy
and Coastal Corp. breezed through the FERC review process last Wednesday,
collecting seals of approval, at the same time the agency said it wanted
to take another look at two proposed mergers of electric utilities.
The Commission's merger review authority is limited to examining the
impact on the wholesale electric market. In the Columbia-NiSource and El
Paso-Coastal reviews the Commission found neither the horizontal nor vertical
aspects of the proposed mergers raised any concerns about competition.
Natural gas plays a minimal role in determining power prices in the
electric market areas of Columbia-NiSource, FERC said. Columbia has committed
to selling off its ownership interests in four independent generating facilities
before the merger is completed. FERC also noted NiSource has committed
to join a regional transmission organization, as provided for by FERC Order
Regarding the El Paso-Coastal merger which will create a mega-pipeline
empire, the Commission said it posed no significant competitive concerns
regarding the combination of the companies' generating resources or the
combination of generating resources with its upstream gas and coal interests.
The combined company does not have the market share or market power in
downstream markets to drive up electricity prices through its deliveries
of natural gas.
The combined interstate transmission system of El Paso/Coastal will
consist of over 58,000 miles of pipeline reaching all the major growth
areas in the country. It will be the second largest gatherer of natural
gas in the United States and the third largest U.S. producer of natural
gas - after BP Amoco and ExxonMobil - with over 5 Tcf of proved gas equivalent
reserves and approximately 20.7 Bcf/d of transportation. Together the companies
control over 12,000 net MW of power generation worldwide, 5,500 MW of which
is in the U.S. (See NGI, Jan. 24)
The Federal Trade Commission is reviewing the impact of the $16 billion
El Paso/Coastal merger. The companies expect the transaction, which was
announced in January, to be completed in the fourth quarter. Stockholders
have already approved the transaction.
The final approval of the Columbia/NiSource merger must come from the
Securities and Exchange Commission. That transaction also is expected to
be completed before the end of the year.
The Columbia/NiSource combination already has been approved by the nine
states in which the companies operate. Columbia agreed to the $6 billion
transaction on Feb. 28, and the deal was approved by both sets of shareholders
on June 1 and 2 this year (see NGI, March 6;
June 5). The union is set to create a mega
energy powerhouse serving more than 4 million customers, stretching from
Chicago in the west to New England in the east and south to the Gulf of
The merger marries Columbia's two long lines, Columbia Gas and Columbia
Gulf, plus its five distribution subsidiaries in Ohio, Pennsylvania, Virginia,
Kentucky and Maryland with NiSource's Northern Indiana Public Service (NIPSCO)
electric and gas utility and two smaller utilities in Indiana. NiSource
also owns Market Hub Partners, a storage operator and developer; Crossroads
Pipeline, a 201-mile, 20-inch line from Indiana to Ohio; and Granite State
Gas Transmission, which runs a small line in New England. Columbia is in
the process of selling off its wholesale and retail energy marketing operations
to Enron Corp. subsidiaries or ventures. It has sold its Cove Point LNG
facilities to Williams for $150 million, and put Columbia Propane Corp.
and Columbia Petroleum up for sale.
Regarding the Midcontinent merger proposal of UtiliCorp United with
St. Joseph Light & Power and Empire District Electric Co., the Commission
said the applicants had not shown that the mergers would not adversely
affect competition as a result of consolidating generation and transmission.
And, in fact, results of the market power analysis submitted by the companies
"heighten our concerns that the proposed mergers could adversely affect
competition." In pronouncing a conditional approval, FERC said the
merger partners should submit a revised competitive analysis six months
prior to commencement of integrated operations, at which time the Commission
would "impose any conditions necessary to mitigate potential adverse
In the West, merger applicants Sierra Pacific Power and Nevada Power
with Portland General Electric failed to provide an adequate analysis of
the vertical and horizontal market power effects to enable the Commission
to determine whether competition would be harmed. Consequently, FERC set
out specific procedures for obtaining additional information analysis and