FERC last week voted out a final rule that lays out the”detailed” requirements electric utilities must meet whensubmitting merger applications. The new rule is intended to helpmerger partners file “more complete” applications upfront, whichthen would improve the odds for speedier processing by theCommission, said Commissioner William Massey, who has led the drivefor a streamlined merger process at FERC.

The rule, which was approved by 4-0, identifies the types ofinformation and analyses that merger applicants must provide soFERC can carry out its review of the competitive effects ofhorizontal and vertical utility mergers. In addition, it specifiesthe type of mergers that will be exempt from the filingrequirements, as well as those that are eligible to fileabbreviated applications. In addition, it will provide applicantswith “reasonable predictability” as to how FERC will respond totheir merger proposals, Massey noted. Lastly, the rule maintainsthe same timeframes for processing merger applications that wereestablished in 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 impact 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. believes the agencies arebetter equipped in this area. The DOJ and FTC “have better ways ofobtaining information than I think we do,” and the two agencies”act certainly in less time than we have in a lot ofcircumstances,” 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.”

Susan Parker

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