The Federal Trade Commission (FTC) Wednesday took steps to block Equitable Resources Inc.'s proposed acquisition of Dominion Peoples (see Daily GPI, March 3, 2006), saying the merger would create a natural gas monopoly in certain areas of Allegheny County, PA, especially Pittsburgh.

The agency voted 4-1 against the $970 million deal and authorized staff to seek a preliminary injunction in federal court in the event the Pennsylvania Public Utilities Commission (PUC) approves the merger later this month or in early April.

The two companies provide competitive gas distribution services in the Pittsburgh region. "By removing Dominion Peoples as a competitor through this transaction, Equitable obtains a monopoly in the distribution of natural gas to many nonresidential customers in the Pittsburgh area," including hospitals, schools, churches and apartment buildings, said Jeffrey Schmidt, director of the FTC's Bureau of Competition.

The PUC must first approve the proposed merger before FTC can seek to enjoin the deal. In December, a PUC administrative law judge recommended that the deal be approved, saying it would "not result in any anticompetitive or discriminatory conduct," and would "affirmatively promote the public interest," according to Equitable Resources.

Equitable Resources accused the FTC of overstepping its bounds. "The FTC's action undermines the authority of the PUC, which expressly is authorized to regulate Pennsylvania utilities," said Equitable Chairman Murry S. Gerber. "If the FTC's challenge is successful, 750,000 customers will be deprived the benefits of this proposed acquisition."

Pittsburgh-based Equitable Resources is seeking to acquire Dominion Peoples' natural gas distribution system, which covers 9,400 square miles in southwestern Pennsylvania and serves more than 350,000 customers; Dominion Peoples' midstream gas system, which spans 861 gathering miles and has 44.6 Bcf of throughput capacity; and storage facilities, which include 33.2 Bcf of onsystem storage and 10.8 Bcf of offsystem storage. The deal also calls for Equitable to acquire Dominion Hope, which serves customers in West Virginia, but the FTC is not challenging that aspect of the proposed acquisition. Dominion Peoples and Dominion Hope are owned by Dominion Resources of Richmond, VA.

If completed the acquisition, which was announced in March 2006, would make Equitable the largest gas service provide in Pennsylvania and second largest in West Virginia. Dominion Peoples and Dominion Hope would be integrated into the operations of Equitable Gas Co., a division of Equitable Resources. The addition of 475,000 gas utility customers would triple Equitable's customer base to more than 750,000, according to the company.

Dominion Resources picked up the two gas utilities when it acquired Consolidated Natural Gas of Pittsburgh in early 2000. With the proposed acquisition, Equitable Resources said it is returning the Peoples' utility to Pittsburgh ownership.

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