To Appeasing FTC
With regards to the proposed merger between MCN Energy Group andDTE Energy Co., the Michigan Public Service Commission (MPSC)approved a special agreement last week targeted at resolvingconcerns raised by the Federal Trade Commission (FTC). Under thespecial agreement, MCN’s natural gas utility, Michigan ConsolidatedGas Co. (MichCon), will be able to sell system capacity to a unitof Exelon.
The FTC has been a major sticking point in the realization of amerger that was expected to be completed by the companies in 2000 (seeNGI, Nov. 6, 2000). The FTC staff hadpreviously questioned whether the merger would result in the possibleloss of competition between MichCon and DTE Energy’s Detroit Edisonelectric utility within a narrow overlapping retail distributionarea. By selling system capacity, Exelon will now be able to utilizenatural gas transportation capacity on MichCon’s system within therelevant overlapping distribution areas, creating competition.
Under the contract, Exelon will be able to use 5 Bcf of annualcapacity to serve any type of customer, with an additional 15 Bcfof supplemental capacity available for purchase in 1 Bcfincrements. At least half of the supplemental capacity must beutilized to serve on-site power generation or electric-displacementapplications such as gas fired air conditioning and air compressionequipment. In excess of the 20 Bcf of annual capacity, the contractstipulates that Exelon may exercise its right to acquire additionalnatural gas capacity to serve only identified electric generationmarkets.
“The capacity contract we filed with the MPSC is a refinedversion of our previously announced agreement,” said MCN CEO AlfredR. Glancy III. “We and Exelon worked closely with the FTC staff toamend the original proposal, and we believe this contract fullyaddresses the agency’s concerns. While we can’t predict withcertainty the timing or outcome of the FTC’s review, we areencouraged by the progress represented by the filing of thiscontract and believe our merger will be approved soon. We lookforward to closing the transaction as originally announced and tomoving forward with integration of the two companies.”
The contract agreement with Exelon remains subject to completionof MCN’s merger with DTE Energy. Once the $4.6 billion merger iscomplete, the companies expect to realize $1 billion in corporatesynergies. DTE’s Detroit Edison serves 2.1 million electriccustomers in Southeastern Michigan, while MCN’s MichCon serves 1.2million gas customers throughout Michigan.
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