FERC yesterday voted out a final rule that lays out “detailed”requirements for electric utilities to meet when submitting mergerapplications. The new rule is intended to help merger partners file”more complete” applications upfront, which then would improve theodds for speedier processing by the Commission, said CommissionerWilliam Massey, who has led the drive for a streamlined mergerprocess at FERC.
The rule, which was approved by 4-0, specifies the informationand analyses that merger applicants must provide so FERC can carryout its review of the competitive effects of horizontal andvertical utility mergers. In addition, it identifies the type ofmergers that will be exempt from the filing requirements, as wellas those that would be eligible to file abbeviated applications. Inaddition, it will provide applicants with “reasonablepredictability” as to how FERC will respond to their mergerproposals, Massey noted. Lastly, the rule maintains the sametimeframes for processing merger applications that were establishedin the 1996 policy statement on the issue.
The new merger rule is a “measure of how much things arechanging in the industry,” said Chairman James J. Hoecker, addingthat it asks applicants to identify strategic alliances, jointventures 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 simulationfor evaluating the market effects of the “strategic pricing andoutput decisions” of merger partners; requires applicants toevaluate the potential effects of other mergers that have beenannounced but not yet consummated; permits review of a merger’seffects on retail markets if warranted; recognizes the potential ofregional transmission organizations (RTOs) to mitigate thecompetitive effects of problem mergers; and requires applicants toanalyze the impact of their proposed mergers on ancillary gridservices, Massey said.
Because mergers have the potential to “threaten competition,”Hoecker believes the Commission “must continue to hone itsanalytical skills and maintain its vigilance in this area.” Hedisagrees with critics who argue that FERC should turn over reviewof electric mergers to the Department of Justice (DOJ) and theFederal Trade Commission (FTC). “The antitrust agencies, as good asthey are, don’t understand this industry as well as we do.”
But Commissioner Curt Hebert Jr. had a different view. The DOJand FTC “have better ways of obtaining information than I think wedo,” and the two agencies “act certainly in less time than we havein a lot of circumstances,” he said.
At a minimum, “I would impose deadlines on us” in which tocomplete reviews of mergers. “The DOJ and FTC can operate that way,and certainly…we can.”
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