After meeting significant conditions to mitigate market power,Enova Corp. and Pacific Enterprises, holding companies of San DiegoGas & Electric and Southern California Gas, respectively,received final FERC approval yesterday of their $6.6 billionmerger. FERC approved the merger application with only minorcode-of-conduct modifications.
The Commission’s draft order, which denied the rehearingrequests of Southern California Edison, Public Power Authority anda number of other intervenors, focused primarily on the resolutionof vertical market power concerns. The biggest concern was themerged company’s ability to raise the cost of natural gas toadversely affect competition and the price of electric power inSouthern California. But that was eliminated when the CaliforniaPublic Utility Commission and the Department of Justice requiredSDG&E divest all of its gas-fired generation. Other marketpower concerns were addressed when the CPUC adopted “remedialmeasures” suggested by FERC’s June order and committed to enforcethe measures, the Commission said.
“I think this is a good final order,” said FERC Chairman JamesJ. Hoecker. “It fosters competition, protects customers, minimizescross-subsidization.”
The Commission, however, had a few last minute changes. Noticingsome potential loopholes, FERC required further restrictions on thetransfer of market information from utility to non-utilityaffiliates. It also was concerned about the use of utility andnon-utility personnel and suggested additional changes in Enova’scode of conduct. “[T]o the fullest extent possible, the employeesof Enova Energy and SDG&E will operate independently of eachother.,” FERC said. The applicants have 30 days to file theadditional changes.
The companies expect to make the proposed changes and begintheir combination July 1, pending approval of the Securities andExchange Commission. “We are pleased to have a decision that allowsus to move forward with our plans to be a full-service energyprovider on a national basis,” said Bill Reed, vice president ofregulatory and governmental affairs for Enova.
The merger will result in a new Fortune 500, San Diego-basedenergy services company called Sempra Energy. It will bring underone roof about 5.5 million gas meters and 1.2 million electricmeters in Southern California, creating the largest retail energycustomer base in the nation.
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