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Electric Mergers: Transmission Pricing, Market Size, and Effects on Competition

Fortnightly Magazine - June 1 1996

power will be created or enhanced.

11. The California Public Utilities Commission (CPUC), for example, even at this early stage, has directed two utilities in California to prepare a feasibility study of the divestiture of 50 percent of their fossil-fueled generating assets. This requirement is not based on a prior merger or other anticompetitive conduct of those utilities, but simply reflects the CPUC's view of what is necessary to permit the deregulation of generation.

12. There are a number of significant procompetitive business needs that such mergers might serve, including the creation of economies of scale in administrative and general expenses and fuel procurement and geographic risk diversification.

13. Under section 10(c) of the Public Utility Holding Company Act of 1935 (PUHCA), interconnection and geographical contiguity traditionally have been prerequisites to approval under the Security and Exchange Commission's review of utility mergers. Enforcement of the statutory standards upon such review is waning, however, and this aspect of PUHCA doubtless will be repealed as part of the restructuring process.

14. This result is foreshadowed by the CPUC's proposal that two utilities divest 50 percent of their generating assets. See, note 10, supra.

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