FERC Issues 'Detailed' Filing Rule for Electric Mergers
FERC last week voted out a final rule that lays out the
"detailed" requirements electric utilities must meet when
submitting merger applications. The new rule is intended to help
merger partners file "more complete" applications upfront, which
then would improve the odds for speedier processing by the
Commission, said Commissioner William Massey, who has led the drive
for a streamlined merger process at FERC.
The rule, which was approved by 4-0, identifies the types of
information and analyses that merger applicants must provide so
FERC can carry out its review of the competitive effects of
horizontal and vertical utility mergers. In addition, it specifies
the type of mergers that will be exempt from the filing
requirements, as well as those that are eligible to file
abbreviated applications. In addition, it will provide applicants
with "reasonable predictability" as to how FERC will respond to
their merger proposals, Massey noted. Lastly, the rule maintains
the same timeframes for processing merger applications that were
established in the 1996 policy statement on the issue.
The new merger rule is a "measure of how much things are
changing in the industry," said Chairman James J. Hoecker, adding
that it asks applicants to identify strategic alliances, joint
ventures and tolling arrangements with upstream gas suppliers.
These are the "kinds of things that affect market concentration,
market power that frankly we weren't focused on very long ago."
In addition, the rule welcomes the use of computer simulation
for evaluating the market effects of the "strategic pricing and
output decisions" of merger partners; requires applicants to
evaluate the potential impact of other mergers that have been
announced but not yet consummated; permits review of a merger's
effects on retail markets if warranted; recognizes the potential of
regional transmission organizations (RTOs) to mitigate the
competitive effects of problem mergers; and requires applicants to
analyze the impact of their proposed mergers on ancillary grid
services, Massey said.
Because mergers have the potential to "threaten competition,"
Hoecker believes the Commission "must continue to hone its
analytical skills and maintain its vigilance in this area." He
disagrees with critics who argue that FERC should turn over review
of electric mergers to the Department of Justice (DOJ) and the
Federal Trade Commission (FTC). "The antitrust agencies, as good as
they are, don't understand this industry as well as we do."
But Commissioner Curt Hebert Jr. believes the agencies are
better equipped in this area. The DOJ and FTC "have better ways of
obtaining information than I think we do," and the two agencies
"act certainly in less time than we have in a lot of
circumstances," he said.
At a minimum, "I would impose deadlines on us" in which to
complete reviews of mergers. "The DOJ and FTC can operate that way,
and certainly...we can."
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