July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
FORCING A DIVESTITURE SHOULD REMAIN AN OPTION for regulators in a clear case of market power abuse, NARUC members have agreed.
NARUC's executive committee also has opened discussion on a five-year business plan that would increase the association's visibility, improve its technology and make better use of the $10 million it has in reserves.
Members at the National Association of Regulatory Utility Commissioners summer meetings in Seattle, Wash., asked states to give them "clear and adequate authority" to protect consumers from market power. That local authority should require behavioral and structural remedies, such as divestiture, they say.
The resolution, approved at the July 26-29 gathering, refined an earlier resolution tabled at NARUC's winter meetings earlier this year in Washington, D.C.
The earlier proposal called more directly for structural solutions rather than giving regulators an array of options. The latest version also doesn't provide the Federal Energy Regulatory Commission with additional tools to deal with market power. "That was seen as going beyond where the [commissioners] wanted to go," says Charles D. Gray, NARUC general counsel. "It was seen at this point as easier to do it in two bites rather than one and focus this meeting on primarily the state role on market power and the resolution would be silent as to the FERC."
The resolution does call for cooperation with federal agencies such as the Federal Trade Commission, the Department of Justice and the FERC to help monitor and correct market concentration, entry barriers, collusion and other anti-competitive practices.
A "Dialogue" With DOJ, FTC
Left unaddressed in the market power resolution was a section in the earlier proposal that called for legislation to undo the 1988 case of Mississippi Power & Light Co. v. Mississippi ex rel. Moore (487 U.S. 354). Gray says an older NARUC resolution takes a position on whether state agencies must bow to federal will under the filed rate doctrine and pass through in retail rates any purchased power costs approved by regulators at the wholesale level. He says it was not seen as a market power issue as much as a jurisdictional rate-making issue.
NARUC's "Executive Dialogue" session in Minneapolis on July 8-9 helped frame the market power discussion, Gray says. DOJ and FTC officials met with state regulators, allowing them to reach consensus before the Seattle meeting. A committee led by Commissioner R. Brent Alderfer of Colorado helped prepare the draft resolution. Consequently, there was little debate in Seattle on the market power measure.
Specifically, the resolution recognized that:
• After-the-fact antitrust enforcement may not prove sufficient to protect against market power abuses in a transition to competitive markets;
• Abuses may be prevented or mitigated by government actions ranging from functional unbundling to structural separation and divestiture;
• Mitigation measures depend on unique circumstances in a specific market area;
• Congress shouldn't preempt state jurisdiction at the state level to address market power concerns; and
• Several options should be open to states for the mitigation of market power and that states and Congress should preserve these options when considering restructuring legislation.
Flush With Cash, Looking for Visibility