Sales prices for power generation assets in the United States during the past two years have climbed to unprecedented levels. This trend should continue. More than 20,000 megawatts of generation...
FERC Asserts Jurisdiction in Nontraditional Mergers
The Federal Energy Regulatory Commission has approved three orders that together clarify the Commission's jurisdiction over corporate realignments.
The FERC found on April 30, that while it does not have jurisdiction over mergers of public utility holding companies, it does have jurisdiction over transfers of control (dispositions) of public utility facilities. The commission said its jurisdiction covers transfers of control that result from public utility mergers, including transfers of power marketer "paper" facilities such as contracts, and physical facilities such as transmission lines. The three merger applicants had argued such approval was not within FERC's domain.
FERC Commissioner Donald F. Santa Jr. pointed out that although the unusual combinations fell
outside traditional utility mergers, these "kinds of transactions we're seeing today may be more pro-competitive than those of traditional vertically integrated utilities we have looked at in the past."
As competition grows, the FERC said it has a responsibility to the public to examine corporate realignment of jurisdictional facilities of both traditional public utilities and utility power marketers.
The FERC asserted its jurisdiction in the proposed merger of Pacific Enterprises and Enova Corp. (Docket No. EL97-15-000) and the proposed merger of NorAm Energy and Houston Industries (Docket No. EL97-25-000). The third case involved Morgan Stanley Group and Dean Witter, Discover & Co., in which FERC approved the disposition of power marketer facilities (Docket Nos. EC97-23-000 and EL97-32-000).
Proposed Mergers. The FERC ruled that approval under section 203 of the Federal Power Act is required for disposition of jurisdictional facilities of holding company Enova's public utility subsidiaries, San Diego Gas & Electric Co., a traditional electric utility, and Enova Energy, a power marketer. Enova is proposing to merge with Pacific Enterprises, also a holding company, to form "NewCo."
The FERC pointed to a Central Vermont case, which interpreted the disposition clause of section 203 of the FPA [39 FERC ¶ 61295 (1987)]. It determined that the transfer of all of a public utility's stock is a transfer of ownership and control of the utility's jurisdictional facilities, and that such transfer constitutes a "disposition of jurisdictional facilities," which requires FERC approval.
In a later case, the FERC had further explained that it based its assertion of jurisdiction in Central Vermont not solely on the transfer of stock, but on the transfer of control of public utilities and therefore on control over jurisdictional facilities of those utilities [Central Illinois Public Service Co., 42 FERC ¶ 61,073 (1988)].
Power Marketer Disposition. In approving the disposition of power marketer facilities in the Wall Street merger, the FERC gave permission for control of MS Capital and CHI Power Marketing Inc., power marketers with ties to Morgan Stanley, to pass to the new company, Morgan Stanley, Dean Witter, Discover & Co. The FERC said it would continue to exercise authority over MS Capital and CHI Power, which it has allowed to sell power at market-based rates. In a previous order, the FERC had barred the two marketers from making affiliate sales at market-based rates.
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