July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
Talk runs gamut from "rocket docket" to "Just go slow." A merger announcement kickstarted NARUC's annual conference last year. This year, in San Francisco, there was little difference in conference chatter. Only this time, MCI Communications Corp. and British Telecommunications Plc were the suitors, in a $20 billion corporate marriage.
Regulators had better get used to the "M" word, noted speaker John E. Hayes, Jr., chairman of Western Resources Corp.
In utilities alone, he said, there were 69 gas and electric business combinations worth $23 billion through August of 1996, compared to $17 billion in 1995. The 1996 figure exceeds the value of all mergers and acquisitions spanning 1988 to 1994.
But to characterize the National Association of Regulatory Utility Commissioners' November 18-21 conference as "merger-prone" would be inaccurate.
U.S. Rep. Dan Schaefer (R-CO) portrayed Capital Hill's electric restructuring debate as shifting from "just say no" to "just go slow." Edward Tirello, senior vice president of NatWest Securities, predicted that mortgage, cable, alarm and long-distance telephone services will be sold packaged (em with the main consumer bennie being frequent flier miles. And William Massey of the Federal Energy Regulatory Commission (FERC) called for a "rocket docket," a fast-track merger approval if a case tripped no competitive buzzers.
Rep. Schaefer, for his part, said the restructuring debate had become one of the most closely watched in Washington, DC. Even the Clinton administration has switched gears, he said. A year ago the White House said there's no reason to consider retail choice legislation. "Today, the administration is actually drafting retail choice legislation and holding field hearings throughout the country." At least 47 states, the congressman added, were studying retail choice. Some are working to implement their plans.
"The simple suggestion that competitors would ignore residential market consumers representing a market of over $90 billion a year is ludicrous," he said of deregulating the retail market. "The only way small consumers will not see the benefits of competition is if they are not allowed by policy makers and regulators to have direct access to the free-market system."
Massey, meanwhile, described FERC's "near future" policy concerns:
• Implement and rehear Order 888, largely for technical corrections;
• Boost regional efficiency to eliminate "pancaked transmission rates" and to nourish fledgling independent system operators (ISOs);
• Deal with generation-based market power;
• Ensure that FERC policies protect grid
• Accommodate "pro-competitive state retail access and restructuring programs."
"How we should work with the states to facilitate these state restructuring programs will be a major area of policy development for FERC over the next couple of years," he said.
Massey was encouraged by growing interest in the ISO concept because properly structured it could eliminate undue discrimination better than functional unbundling.
"Look at what is happening coast-to-coast," he said. "Starting in New England, there will be a New England ISO proposal. Although we rejected the PJM ISO filing, PJM remains committed ... we have ISO fever, and I think it is a good thing, with a few caveats." He said the ISO must be structured for independence, must produce regional efficiencies, and