[BETA] Fortnightly

An administrative law judge at the Federal Energy Regulatory Commission has recommended approval of the proposed three-way merger of WPL Holdings, IES Industries, and Interstate Power Co. to form Interstate Energy Corp.

Earlier this year, the companies and the FERC staff reached an agreement on market power mitigation. One stipulation was that the utilities had to contract for purchase of transmission capacity to interconnect the three utility systems. A portion of that capacity would be made available to other utilities on a first-come basis.

The utilities agreed not to build transmission lines to directly interconnect their systems until first constructing at least 400 megawatts of additional simultaneous transmission import capability into Wisconsin. To accomplish that goal, the utilities have proposed eight transmission projects. Administrative Law Judge Bruce I. Birchman also recommended that the partners investigate other projects that would increase transmission system import capability before constructing additional transmission lines across the Mississippi River if the eight proposed projects are not sufficient.

"The proposed approval order states that there is no basis for denying the Interstate Energy Corp. merger," said Erroll B. Davis Jr., WPL Holdings president and CEO. "Under conditions that Interstate Energy Corp. already has accepted, there will be absolutely no market power or anticompetition concerns as a result of the merger."

The utilities anticipate a final order this fall. But a coalition of utilities, co-ops, and ratepayer groups on July 7 said they would seek reversal of the ALJ's proposed order.

Citizens' Utility Board Executive Director David Merritt predicted the merger would face greater scrutiny by the Wisconsin Public Service Commission. "WPL is proposing to form a federally registered holding company and to conduct its business with its Iowa merger partners through a coordination agreement," Merritt said. "Both of these aspects of their merger pose substantial federal preemption problems should our state's commission wish to challenge costs being passed onto retail customers."

"The ALJ's decision is merely preliminary and will be reviewed by the full FERC," said Madison Gas & Electric Co. spokesperson Steve Kraus. "In Primergy, the ALJ also gave preliminary approval to that merger and the commission reversed his initial decision."

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