FERC Gives Nod to Merger Filing Rule
FERC yesterday voted out a final rule that lays out "detailed" requirements for electric utilities to 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, specifies the 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 identifies the type of mergers that will be exempt from the filing requirements, as well as those that would be eligible to file abbeviated 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 effects 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. had a different view. 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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