MCN Moves Closer
To Appeasing FTC
With regards to the proposed merger between MCN Energy Group and DTE Energy Co., the Michigan Public Service Commission (MPSC) approved a special agreement last week targeted at resolving concerns raised by the Federal Trade Commission (FTC). Under the special agreement, MCN's natural gas utility, Michigan Consolidated Gas Co. (MichCon), will be able to sell system capacity to a unit of Exelon.
The FTC has been a major sticking point in the realization of a merger that was expected to be completed by the companies in 2000 (see NGI, Nov. 6, 2000). The FTC staff had previously questioned whether the merger would result in the possible loss of competition between MichCon and DTE Energy's Detroit Edison electric utility within a narrow overlapping retail distribution area. By selling system capacity, Exelon will now be able to utilize natural gas transportation capacity on MichCon's system within the relevant overlapping distribution areas, creating competition.
Under the contract, Exelon will be able to use 5 Bcf of annual capacity to serve any type of customer, with an additional 15 Bcf of supplemental capacity available for purchase in 1 Bcf increments. At least half of the supplemental capacity must be utilized to serve on-site power generation or electric-displacement applications such as gas fired air conditioning and air compression equipment. In excess of the 20 Bcf of annual capacity, the contract stipulates that Exelon may exercise its right to acquire additional natural gas capacity to serve only identified electric generation markets.
"The capacity contract we filed with the MPSC is a refined version of our previously announced agreement," said MCN CEO Alfred R. Glancy III. "We and Exelon worked closely with the FTC staff to amend the original proposal, and we believe this contract fully addresses the agency's concerns. While we can't predict with certainty the timing or outcome of the FTC's review, we are encouraged by the progress represented by the filing of this contract and believe our merger will be approved soon. We look forward to closing the transaction as originally announced and to moving forward with integration of the two companies."
The contract agreement with Exelon remains subject to completion of MCN's merger with DTE Energy. Once the $4.6 billion merger is complete, the companies expect to realize $1 billion in corporate synergies. DTE's Detroit Edison serves 2.1 million electric customers in Southeastern Michigan, while MCN's MichCon serves 1.2 million gas customers throughout Michigan.
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