In an attempt to put the brakes on the on-going merger mania,two trade groups of consumer-owned electric utilities petitionedFERC Monday to impose a two-year moratorium on marriages betweenand among large power utilities.

The petition by the American Public Power Association (APPA) andthe National Rural Electric Cooperative Association (NRECA) is anattempt to stop the feeding frenzy that’s ultimately led to anumber of defensive mergers in the electric utility industry, saidGregory Wortham, counsel for NRECA.

Two years ago, companies believed they needed one millioncustomers to survive in the power market, he noted, adding thatthat figure grew to four million last year and to 10 millioncustomers this year. “Some people have gone as far to say 40 to 50million or you won’t make it,” Wortham said. “They’re creating thisfrenzy that nobody’s big enough, and so everybody’s going to gobbleeverybody else up, which defeats the whole purpose of going tocompetition” in the end.

“What we’re saying is let’s take these two years to reallyanalyze what’s actually happening in some of the states, figure outif convergence mergers are irrelevant to market power or if they’rea new kind of market power, and figure out if bi-coastal deals arenot a problem or, in fact, are a bigger problem than contiguouselectric mergers,” Wortham noted. “Let’s try to stop the mergerfrenzy, where everything’s got to be geometrically larger than whatit was the year before.”

The Commission needs to collect and analyze this kind ofinformation to determine whether a merger meets the public intereststandard in today’s market, according to Dave Penn, APPA’s deputyexecutive director. “It’s not like in the old days when they werejudging a merger based on a fairly stable industry, with verypredictable or little institutional change.”

The APPA also foresees a “significant up-tick” in certain kindsof mergers soon, which it believes makes another strong case for atemporary ban. Increases are anticipated in convergence mergers andin combinations between utilities with non-adjacent territories,said Penn.

The two trade groups have urged the Commission to apply themoratorium only in cases where the acquired or acquiring utilityhas more than one million electric metered accounts, whichtranslates into roughly 2-3.5 million customers, or where aproposed merger would create a combined company with more than onemillion metered accounts.

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