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Special Report

Fortnightly Magazine - July 15 1997

Pitofsky seemed somewhat noncommittal on either functional or "operational" unbundling, although he appeared to favor the second choice. Under that option, an independent system operator, or ISO, ensures open access and transparent pricing.

The FTC chair pointed out that if "you make access absolutely open, then the people who control the central facility will not invest in it in the first place. Or they will not maintain it as time goes on. On the other hand, if you don't make access available, then smaller companies who are not party to the transmission monopoly will have no opportunity to get to the market. It is a very, very difficult question."

Melamed also leaned toward ISOs (em "potentially a more promising solution for preventing anti-competitive, discriminatory behavior."

But "FERC's order, which relies on the integrated utilities to engage in conduct that may be inconsistent with their economic interests, may prove insufficient to ensure open access," according to Melamed's written testimony.

Melamed agreed that two benefits of restructuring are open-access transmission and time-of-use pricing. Stranded costs, he said, should be recovered on "a competitively neutral basis to minimize distortions of competitive choices by wholesale and retail customers."

The House panel also questioned the two officials on the merger wave that has overcome the country and whether they were, indeed, doing something about it.

Pitofsky said record highs were set in the past two years, with 65 multi-industry cases reviewed; another record was likely this year.

"I would like to suggest that we're not doing nothing about it," he said.

"Oh, no. You're approving. You're doing a lot about it," said Rep. John Conyers Jr. (D-Mich.).

"We're not approving all of them," the FTC chair countered. "The people who are suing wouldn't say we're doing nothing."

He admitted to his agency being overwhelmed, "but we are actively enforcing the law. ... It is certainly true that many industries are restructuring themselves through mergers in a way that legitimately raises serious questions."

On electric and gas mergers, the FERC is the first line of defense, but not the exclusive line of defense, Pitofsky said.

Howe, of the Massachusetts Department of Public Utilities, testified as part of a panel of industry reps who offered their take on the antitrust aspects of restructuring.

Anthony F. Earley Jr., president and CEO of Detroit Edison Co., told the House panel that because the FERC requires transmission access through Order 888, no industry-specific legislation related to market power was necessary. Competition already was under way and current safeguards are adequate to protect free trade.

But Roy Thilly, g.m. and counsel to The Wisconsin Public Power Inc. System, told the committee that current infrastructure is inadequate for transmission and more high-voltage lines were needed to improve bottlenecks. Thilly's system owns no transmission facilities and is dependent on four private utilities. He called for preserving antitrust laws and augmenting the FERC's power so that it may better nip anti-competitive practices in the bud.

Steven D. Burton, senior v.p. of Sithe Energies Inc., said he didn't advocate legislatively mandated divestiture as a protection against market