In union circles, they call it "burial insurance." That apt phrase denotes the severance, early retirement and re-training packages negotiated for veteran utility workers sideswiped by a changing...
Score a Deal? 20-Odd Mergers in Search of a Policy
to make a further status report on its attempts to obtain a temporary restraining order, or to show cause why the merger is not dead.)
In many cases, interpreting the Appendix A screen has sometimes proved a no-brainer.
At least two horizontal mergers (WEC/ESELCO and WPS/UP) were approved without hearings where one of the parties (Edison Sault Electric and Upper Peninsula Energy, respectively), had no "available economic capacity,"fn9 and thus no additional market share to bring to the deal. In the Conectiv case, the merged company was projected to have no "uncommitted capacity"fn10 for the first four years following the merger. Moreover, though Delmarva Power & Light had gas operations, it didn't sell gas to any gas-fired generating plants owned by Atlantic City Electric, its merger partner.
Two vertical mergers won favor (PG&E/ Valero and KeySpan) where at least one of the parties owned no generation at all. Similarly, in several of the vertical mergers, the parties showed that the gas pipelines owned by one party did not sell gas to any electric generators that competed in the same sales markets served by the electric utility partner.
The FERC rule even excuses merger applicants from filing a competitive screen analysis where the merging firms do not have facilities or sell relevant products in common geographic markets.
As the FERC explained in the PG&E/Valero case, Valero's pipelines generally ran from West Texas to East and South Texas. Said the commission, "It is highly unlikely that any electric generation in Texas is currently in competition with any of the generating resources affiliated with PG&E."
Purchased power contracts can add to market share, but the rule seems mixed. In the Conectiv case, the FERC said it would treat generating resources sold to utilities by nonutility generators as controlled by the purchasing utility, thus adding to potential utility market power. In the Houston/NorAm case, however, which fell under FERC jurisdiction because a NorAm affiliate (NorAm Energy Services) was a power marketer, the commission allowed the affiliate to show that it did not control generation represented by its purchased power contracts. Thus, the contracts did not count as market share in the Appendix A screen.
At times the FERC has appeared to interpret the screen in a manner helpful to merger applicants. In the KeySpan case, the evidence showed that Long Island Lighting Co. and Brooklyn Union Gas Co. together controlled 47 percent of the aggregate natural gas pipeline capacity into Long Island. Would that control cast a chilling effect on efforts by others to construct new gas-fired generation on Long Island, to break into the market? The FERC effectively said no. It saw no negative impact because the evidence showed that the competitors had little chance or incentive to build new generating plants in western Long Island.
As the FERC explained, "[T]he Brooklyn Union service area is a densely populated urban area with few, if any, available sites for generating units ¼ [H]igh construction costs and environmental concerns [also] reduce the likelihood of additional generation being sited in BUG's service area."
Therein lies the irony. Not