FERC's Merger Policy: Still Founded on Market Power

 

But the fly in the ointment is computer modeling, where no one yet agrees on how to mirror the real world.

A promise made is a promise kept, even in the halls of government.

And so it was that in mid-November, after a four-year wait, the Federal Energy Regulatory Commission (FERC) issued Order 642, its new final rule on filing requirements for mergers involving public utilities.¹ With the new rule, effective Jan. 29, the commission at last honored the pledge it had made back in December 1996, when it had issued a new "policy statement"² indicating a desire to change its approach.

Order 642 announces no policy departures. On the face, it simply establishes filing requirements to support applications for mergers and other asset transactions that are subject to FERC's jurisdiction under Section 203 of the Federal Power Act. Nevertheless, in its preamble the order does offer valuable guidance on how the commission will look at future mergers with major competitive consequences. Order 642 also is important for what it does not do.

Order 642 rejects certain parties' requests for a merger "moratorium," and leaves unchanged the FERC's requirements concerning a merger's impact on ratepayers and on federal and state regulation. Order 642 also announces that competition-related showings will not be required for transactions to join a regional transmission organization (RTO), sell transmission facilities, or accomplish internal corporate reorganizations. FERC also reaffirms its policy of not evaluating a merger's effect on retail competition unless a state lacks authority under state law and "asks us to do so."