[Federal Register Volume 61, Number 26 (Wednesday, February 7, 1996)]
[Proposed Rules]
[Pages 4596-4597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2548]
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Proposed Rules
Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 61, No. 26 / Wednesday, February 7, 1996 /
Proposed Rules
[[Page 4596]]
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Chapter I
[Docket No. RM96-6-000]
Inquiry Concerning Commission's Merger Policy Under the Federal
Power Act
January 31, 1996.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice of inquiry.
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SUMMARY: The Federal Energy Regulatory Commission requests comments on
whether it should revise its criteria and policies for evaluating
public utility mergers in light of fundamental changes in the electric
industry and the regulation of that industry.
DATES: Written comments of no more than 50 pages, double-spaced, must
be received no later than May 7, 1996.
ADDRESSES: Send comments to: Office of the Secretary, Federal Energy
Regulatory Commission, 888 First Street NE., Washington, DC 20426.
FOR FURTHER INFORMATION CONTACT: Jan Macpherson, Office of the General
Counsel, Federal Energy Regulatory Commission, 888 First Street NE.,
Washington, DC 20426, (202) 208-0921.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in the Public Reference Room
at 888 First Street NE., Washington, DC 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing (202) 208-1397 if dialing locally or 1-800-856-3720 if dialing
long distance. To access CIPS, set your communications software to
19200, 14400, 12000, 9600, 7200, 4800, 2400 or 1200 bps, full duplex,
no parity, 8 data bits, and 1 stop bit. The full text of this order
will be available on CIPS indefinitely in ASCII and Wordperfect 5.1
format. The complete text on diskette in WordPerfect format may also be
purchased from the Commission's copy contractor, La Dorn Systems
Corporation, also located in the Public Reference Room at 888 First
Street NE., Washington, DC 20426.
I. Background
The Federal Energy Regulatory Commission (Commission) requests
comments on whether its criteria and policies for evaluating mergers of
public utilities need to be revised in light of fundamental changes in
the electric industry and the regulation of that industry.
Under section 203 of the Federal Power Act (FPA),\1\ no public
utility may dispose of, merge, or consolidate certain facilities under
the Commission's jurisdiction without the Commission's approval.\2\ The
Commission is to approve a merger if the merger is ``consistent with
the public interest.''
\1\ 16 U.S.C. Sec. 824b.
\2\ In this order, we will refer to all such transactions as
mergers.
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The Commission presently analyzes proposed mergers by examining six
non-exclusive factors that were set forth in Commonwealth Edison
Company.\3\ These factors are:
\3\ 36 FPC 927 (1996), aff'd sub nom. Utility Users League v.
FPC, 394 F.2d 16 (7th Cir. 1968), cert. denied, 393 U.S. 953 (1968).
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(1) the effect on the applicants' operating costs and rate levels;
(2) the contemplated accounting treatment;
(3) the reasonableness of the purchase price;
(4) whether the acquiring utility has coerced the to-be-acquired
utility into acceptance of the merger;
(5) the effect on competition; and
(6) the impact on the effectiveness of state and Federal
regulation.
Of these factors, the effects on costs and rates, and on
competition, have been the most significant issues presented in recent
merger cases.
We have used the Commonwealth factors for almost thirty years.
However, the industry and our regulation of it have changed
significantly during that time, and even greater changes are likely in
the future. As we explained in detail in our proposed Open Access
rule,\4\ a variety of factors has created considerable competition in
the generation market and structural changes in the industry itself.
For instance, the advent of various non-traditional generating entities
and the greater availability of transmission (brought about by the
Energy Policy Act of 1992 \5\ and by certain utilities' ``open access''
filings) have allowed a great deal of competition, particularly in the
market for new generation. Since the Open Access NOPR was issued, there
have been further competitive changes. For example, thirty-one public
utilities have filed transmission tariffs that provide varying degrees
of open access; certain power pools have discussed adopting Independent
System Operators (ISOs) or other structural changes;\6\ and the
California Public Utilities Commission has issued an order directing
restructuring of the electric industry in California to include a spot
market power exchange, an ISO and retail access, among other things.\7\
With the final Open Access rule, non-discriminatory wholesale open
access will be available on an even wider basis. This, in turn, will
further increase competition.
\4\ Promoting Wholesale Competition Through Open Access
Nondiscriminatory Transmission Services by Public Utilities, 60 FR
17662 at 17668-17675 (April 7, 1995), IV FERC Stats. & Regs.,
Proposed Regulations para. 32,514 at 33,057-33,069 (1995).
\5\ 16 U.S.C. Secs. 824j-824l.
\6\ Transcript of Commission's Conference on Power Pools Under
the Open Access Proposal, vol. 1, pages 75 et seq. (New York Power
Pool); 78 et seq. (New England Power Pool); 82 et seq.
(Pennsylvania-New Jersey-Maryland Power Pool) (Dec. 5, 1995).
\7\ D.95-12-063 (Dec. 20, 1995), as modified by D.96-01-009
(Jan. 10, 1996).
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In light of these fundamental changes, the Commission solicits
comments on whether our criteria and policies for evaluating mergers
need to be changed. We note that several entities commenting on the
Open Access proposal argued that the policy needs to be updated. In
general, these commenters are concerned that mergers may create ``mega-
utilities'' that will have market power in generation, particularly if
these utilities are able to
[[Page 4597]]
avoid the pancaked transmission rates that their competitors have to
pay.\8\
\8\ E.g., American Public Power Association initial comments at
4, reply comments at 9-10; National Rural Electric Cooperative
Association initial comments at 20-21; National Independent Power
Producers reply comments at 5-6; Indiana Utility Regulatory
Commission initial comments at 36-7.
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II. Public Comment Procedures
The Commission invites all interested parties to submit an original
and 14 copies of their comments. Comments should not exceed 50 pages,
double-spaced, and should include an executive summary. Commenters
should briefly describe themselves and should refer to Docket No. RM96-
6-000. They should submit a copy of their comments on a 3\1/2\ inch
diskette in ASCII II format. Comments must be filed with the Office of
the Secretary, Federal Energy Regulatory Commission, 888 First Street
NE., Washington, DC 20426, no later than May 7, 1996. All comments will
be placed in the Commission's public files and will be available for
inspection in the Commission's Public Reference Section, 888 First
Street NE., Washington, DC 20426, during regular business hours.
By direction of the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 96-2548 Filed 2-6-96; 8:45 am]
BILLING CODE 6717-01-P
