(September 2009) The industry’s best companies are weathering the financial storm reasonably well, with the F40 delivering equity returns in the 14-percent range for fiscal 2008....
Hurdling Ever Higher: A New Obstacle Course for Mergers at the FERC?
smart savvy utility executives who are looking to merge will form an alliance that can build on strengths, reduce weaknesses, provide substantial customer benefits, and otherwise make the right strategic fit."21 The FERC should allow executives to make these adjustments, thereby allowing market forces to operate in response to the rapid changes brought about by increased competition. For the FERC to reengineer its merger standard to inject more of its brand of competition into the mix would upset the proper balance that must govern sound merger policy. As the
Department of Justice has recognized, good mergers can stimulate competition. The balanced approach traditionally applied to other competitive markets should continue to guide the FERC's review of utility mergers. t
John Mandt is a partner with the Balch & Bingham law firm in Birmingham, AL. He advises public utility and other clients concerning antitrust matters, mergers and acquisitions, and corporate finance. Karl Moor is a partner with the firm's Washington, DC, office, specializing in regulatory matters affecting investor-owned electric utilities, with particular emphasis on matters of competition policy and the antitrust implications of regulatory change.
1 Section 203 of the Federal Power Act vests regulatory authority over public utility mergers with the FERC, 15 U.S.C. (sc 824a (1988).
2 Federal Energy Regulatory Commission's Notice of Proposed Rulemaking, "Promoting Wholesale Competition Through Open Access Nondiscriminatory Trans. Servs. By Pub. Utils.," Dkt. No. RM95-8-000, Suppl. Notice of Proposed Rulemaking, "Recovery of Stranded Costs by Pub. Utils. and Transmitting Utils.," Dkt. No. RM94-7-001, ("FERC Mega-NOPR"), 70 F.E.R.C. (pp 61,357, 60 Fed.Reg. 17,662 (April 7, 1995).
3 Midwest Power Sys., Inc. Dkt. No. EC95-4-000, 71 F.E.R.C. (pp 61,386 at 62,513 (1995).
4 See, "FERC's Evolving Merger Policy," Address by William L. Massey, Commissioner Federal Energy Regulatory Commission, Edison Electric Institute, Fall Legal Conference, Palm Beach, FL, October 12, 1995, p. 3 ("Massey speech to EEI").
5 See, Utah Power & Light Co., 45 F.E.R.C. (pp 61,095 at 61,283 (1988).
6 Mega-NOPR, mimeo at 4.
7 See, Brown Shoe Co. v. U.S., 370 U.S. 294, 319-20 (1962).
8 See, 1984 Merger Guidelines at Section 1; 1992 Merger Guidelines at 0.1.
9 See, Massey Speech to EEI at 6.
10 See, W. Hughes & G. Hall, "Substituting Competition for Regulation," 11 Energy Law Journal 243, 245 (1990).
11 Mega-NOPR, mimeo at 3.
12 See, Midwest Power Sys., Inc., 71 F.E.R.C. (pp 61,386 at 62,512 (June 22, 1995).
13 See, 1992 Merger Guidelines at Section 0.
14 Midwest Power Sys., Inc., 71 F.E.R.C. (pp 61,386 at 62,513.
15 See, FTC v. Alliant Techsystems, Inc., [1992-3] Trade Cas. (CCH) (pp 70,047 (D.D.C.1992); U.S. v. Alliant Techsystems, Inc., 1994 WL 362247 (C.D.Ill.1994).
16 See, generally, Kwoka & Warren Boulton, "Efficiencies, Falling Firms, and Alternatives to Merger; A Policy Synthesis," Antitrust Bulletin, 431, 439 (Summer 1986) (noting that merger alternatives such as joint ventures, plant swaps, or interfirm contracting may pose competitive risks of increased collusion).
17 See, Massey speech to EEI, mimeo at 7 (emphasis added).
18 Comments of the Department of Justice in response to the Federal Energy Regulatory Commission's Mega-NOPR,