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News Digest

State PUCs
Fortnightly Magazine - April 15 2000

Purchase Obligation. Citing a new hydro project as too unreliable in its energy output, the Alaska PSC said it would not require the local utility to purchase project power at avoided cost rates, though the hydro project qualified as a small power production facility (QF) under the Public Utility Regulatory Policies Act of 1978.

The case involved South Fork Hydro LLC (the QF) and Matanuska Electric Assoc. Inc..

Gas Unbundling . Massachusetts OK'd a model tariff for the state's unbundling program for consumer choice in natural gas, which was to begin on April 1.

Nevertheless, it warned that the new tariffs could lead to "unacceptable cost-shifting" as the result of deaveraging of LDC-system capacity costs, and that company-specific review of capacity allocators for each class of customers will be reviewed as each utility completes its compliance filings in the case..

Electric Customer Choice . The Vermont board opened an initiative to consider how to implement retail access policies for Central Vermont Public Service Corp. (CVPS) and Green Mountain Power Corp. (GMP), slated for startup in Sept. 2001 on a voluntary basis. .

Mergers & Acquisitions

AEP + C&SW. The FERC approved the merger of American Electric Power Co. and Central & South West Corp., but only upon condition that the two halves of the merged company (AEP East and AEP West) will transfer operational control of their transmission facilities to a fully functioning, commission-approved regional transmission organization (RTO) by Dec. 15, 2001, the date specified in the final rule (FERC Order 2000) for RTO formation.

The FERC reversed an initial decision issued last year by an administrative law judge that had found few problems with the deal. Instead, the FERC said the merger would enhance the potential for market power and thus impose an adverse effect on competition absent the required condition for RTO formation.

The commission was satisfied by plans for the merger applicants to divest about 500 MW of generation in certain key markets, but saw competitive problems even if the deal would not increase market share in generation. It rejected arguments by the merger applicants that, in highlighting the mere enhancement of market power as significant, it was improperly considering pre-merger market power..

Commissioner Curt Hébert dissented, saying the majority's theory wrongly treated the merger as a vertical combination. He noted that just two weeks prior to the commission's order, the International Competition Advisory Committee at the U.S. Dept. of Justice had recommended ending the FERC's role in looking at antitrust issues in the merger context.

"Our claimed expertise leads today's majority to invent market power out of thin air," said Hébert."Congress should remove us from the merger business."

NEES + Eastern Utilities. The U.S. Nuclear Regulatory Commission approved the merger between New England Electric System and Eastern Utilities Associates, according to NEES president and chief executive officer Rick Sergel. The merger still requires approval by the federal Securities and Exchange Commission, as well as Massachusetts and Rhode Island regulators. "We continue our progress toward completing this merger early this year," Sergel said.

LG&E + PowerGen . PowerGen plc