The mergers of Columbia Energy and NiSource Inc. and El PasoEnergy and Coastal Corp. breezed through the FERC review processWednesday, collecting seals of approval at the same time the agencysaid it wanted to take another look at two proposed mergers ofelectric utilities.

The Commission’s merger review authority is limited to examiningthe impact on the wholesale electric market. In theColumbia-NiSource and El Paso-Coastal reviews the Commission foundneither the horizontal nor vertical aspects of the proposed mergersraised any concerns about competition.

Natural gas plays a minimal role in determining power prices inthe electric market areas of Columbia-NiSource, FERC said. Columbiahas committed to selling off its ownership interests in fourindependent generating facilities before the merger is completed.FERC also noted NiSource has committed to join a regionaltransmission organization, as provided for by FERC Order 2000.

Regarding the El Paso-Coastal merger which will create amega-pipeline empire, the Commission said it posed no significantcompetitive concerns regarding the combination of the companies’generating resources or the combination of generating resourceswith its upstream gas and coal interests. The combined company doesnot have the market share or market power in downstream markets todrive up electricity prices through its deliveries of natural gas.

The combined interstate transmission system of the new company willconsist of over 58,000 miles of pipeline reaching all the major growthareas in the country. It will be the second largest gatherer ofnatural gas in the United States and the third largest U.S. producerof natural gas — after BP Amoco and ExxonMobil — with over 5 Tcfof proved gas equivalent reserves and approximately 20.7 Bcf/d oftransportation. Together the companies control over 12,000 net MW ofpower generation worldwide, 5,500 MW of which is in the U.S. (SeeDaily GPI, Jan. 19)

The Federal Trade Commission is reviewing the impact of the $16billion El Paso/Coastal merger. The companies expect thetransaction, which was announced in January, to be completed in thefourth quarter. Stockholders have already approved the transaction.

The final approval of the Columbia/NiSource merger must comefrom the Securities and Exchange Commission. That transaction alsois expected to be completed before the end of the year.

The Columbia/NiSource combination already has been approved by thenine states in which the companies operate. Columbia agreed to the $6billion transaction on Feb. 28, and the deal was approved by both setsof shareholders on June 1 and 2 this year (see Daily GPI, Feb. 29; June5). The union is set to create a mega energy powerhouse servingmore than 4 million customers, stretching from Chicago in the west toNew England in the east and south to the Gulf of Mexico.

The merger marries Columbia’s two long lines, Columbia Gas andColumbia Gulf, plus its five distribution subsidiaries in Ohio,Pennsylvania, Virginia, Kentucky and Maryland with NiSource’sNorthern Indiana Public Service (NIPSCO) electric and gas utilityand two smaller utilities in Indiana. NiSource also owns Market HubPartners, a storage operator and developer; Crossroads Pipeline, a201 mile, 20-inch line from Indiana to Ohio; and Granite State GasTransmission, which runs a small line in New England. Columbia isin the process of selling off its wholesale and retail energymarketing operations to Enron Corp. subsidiaries or ventures. Ithas sold its Cove Point LNG facilities to Williams for $150million, and put Columbia Propane Corp. and Columbia Petroleum upfor sale.

Regarding the Midcontinent merger proposal of UtiliCorp Unitedwith St. Joseph Light & Power and Empire District Electric Co.,the Commission said the applicants had not shown that the mergerswould not adversely affect competition as a result of consolidatinggeneration and transmission. And, in fact, results of the marketpower analysis submitted by the companies “heighten our concernsthat the proposed mergers could adversely affect competition.”Inpronouncing a conditional approval, FERC said the merger partnersshould submit a revised competitive analysis six months prior tocommencement of integrated operations, at which time the Commissionwould “impose any conditions necessary to mitigate potentialadverse competitive effects.’

In the West, merger applicants Sierra Pacific Power and NevadaPower with Portland General Electric failed to provide an adequateanalysis of the vertical and horizontal market power effects toenable the Commission to determine whether competition would beharmed. Consequently, FERC set out specific procedures forobtaining additional information analysis and intervenor input.

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