[BETA] Fortnightly

Feds prefer legislative solution for now, but warn of bid-rigging, cartel behavior later on, after deregulation.

One of the nation's top antitrust officials told the House Judiciary Committee in June that moves toward utility deregulation should focus first on open access to the transmission grid (em and then resolve that problem through rulemaking or legislation, not antitrust enforcement.

"Antitrust is probably not the best way to address access," said Robert Pitofsky, Federal Trade Commission chair. "I think legislation and FERC regulation is a better way of doing it."

Pitofsky could offer no legislative solutions.

"I think you've put your finger on the most difficult question in the entire area of deregulation," the FTC official told Rep. Howard Coble (R-N.C.) "You can have competition in generation. You may have competition at retailing. But if monopoly power persists at distribution, as in the transmission phase, there will be difficulties. I don't really have an answer at this point as to what kinds of legislation would be adequate."

Pitofsky testified at what Judiciary Committee Chair Henry J. Hyde (R-Ill.) called the panel's first foray into the antitrust aspects of electricity restructuring. It was uncertain whether future hearings would affect restructuring legislation, or the focus of hearings held by Rep. Dan Schaefer (D-Colo.). Hyde said he wouldn't impinge on the Commerce Committee's jurisdiction.

At press time, no further Judiciary Committee hearings on antitrust and deregulation had been scheduled.

Pitofsky and A. Douglas Melamed, principal deputy assistant attorney general in the U.S.

Department of Justice antitrust division, testified that lawmakers should hold the deregulating electric industry to the same antitrust standards as other industries.

"I see no need to amend the antitrust laws in any way," the FTC chair said. "The problems that will arise after deregulation will be old-fashioned. There will be cartel behavior, bid-rigging, market division, monopoly abuse, mergers and problems of access. And I think the presence of antitrust laws is adequate to deal with that."

He predicted that consumers will soon be presented with a world of choices. Advertising will make claims about which form or source of electricity is better or worse. "We must be careful to ensure that there's no deception or unfairness in those claims," he said. Through legislation, essential consumer information could be required. "Case-by-case enforcement is sometimes not the most efficient way to go," he added.

John B. Howe, chair of the Massachusetts Department of Public Utilities, seemed to back up Pitofsky's statements.

"Antitrust law is far better viewed as a preventive, rather than a corrective system of law," he said. "But it is invoked as a means of regress. It is slow. It is expensive. It is contentious. Our nation's consumers will be far better served if we simply don't allow situations to occur that could give rise to antitrust violations."

Melamed, of the DOJ, noted that technology has evolved to where competition is possible in generation, but not in transmission and distribution.

Through FERC Order 888, utilities were ordered to separate generation and transmission businesses functionally, without a formal divestiture or spinoff.

In his written testimony,