Shaky merger policy finds the FERC at war with itself.
"IN HIS DELIGHTFUL ARTICLE, "THE FOLKLORE OF Deregulation," published this summer in the Yale Journal on Regulation, federal judge Richard Cudahy notes the ethereal nature of "virtual electricity." This new product, he explains,"exists only as a blip on a computer screen and will never give one a shock." "Reality," he notes, has "retreated to the money part of the system."
We could use a dose of that reality in looking at electric utility mergers.
Over the Veteran's Day holiday, I found time to read some 650 pages of regulatory policy and industry comments on electric utility mergers filed this past spring and summer at the Federal Energy Regulatory Commission (see Docket No. RM98-4-000). The FERC wants to codify the nonbinding policy statement it issued in 1996 in Order 592, and extend that policy to vertical mergers.
Back when Alfred Kahn convinced the federal government to deregulate the rates charged by the nation's passenger airlines, no one correctly anticipated how the new business would operate (em the hub-and-spoke model, fares fluctuating at a whim.