For the partners in a utility merger, the celebration must wait. After opening the most delicate of dialogues, and then negotiating the price and closing the deal, the merger partners must yet gain the approval of regulators. The application may lie sealed in its FedEx pouch, safely on its way to Washington. But long before that, corporate counsel will have reminded the weary negotiators of three daunting facts:
1) The Federal Energy Regulatory Commission (FERC) will review the merger to determine if it is consistent with the "public interest."
2) The FERC's merger policies have kept the industry jumping for nearly a decade.
3) Some Commissioners now believe that the FERC's merger policies may need a tuneup to face the post-EPAct (Energy Policy Act of 1992) world.
Experienced utility executives will remember the 80's, when the FERC aggressively and successfully used its merger approval authority to force merging utilities to file "open-access" transmission tariffs.1 The story was simple: The FERC resorted to merger conditions in the 1980s as a crude tool when it found it had no other means of forcing generic transmission tariffs on a reluctant industry.
Today's executives, driven by business realities that the FERC itself has accelerated, are again opting for the benefits and efficiencies of merger. And, after passage of EPAct and the advent of the FERC Mega-NOPR,2 some might think that the FERC would close the book on using its "conditioning authority" to reshape the industry. Think again.
A FAMILIAR RACE