Corporations will need FERC approval for a merger simply because they own paper assets that qualify as utility property.
In three companion orders issued April 30, 1997, the Federal Energy Regulatory Commission tried to stake out new jurisdictional turf. It attempted to expand its jurisdiction under section 203 of the Federal Power Act to cover "convergent" mergers and reorganizations involving electric utility holding companies and power marketers.
"People are starting to talk about ISOs on the gas side." So says Jerry Pfeffer, lay advisor on energy industries for Skadden, Arps, Meagher & Flom, the New York law firm well known for its work in mergers and acquisitions.
Pfeffer's comment alludes to events now unfolding in Southern California, that fount of fashion, where each round of "deregulation" only doubles the ante in billable hours. This time it's natural gas pipelines. Do they have market power too?
"It Would Not Surprise Me"
Southern California Edison Co. has now alleged that Southern California Gas Co.
Do mergers and "critical mass" really make a difference? The answer, it seems, is yes.
To become more competitive, U.S. electric utilities have embarked on a quest in recent years to improve operational efficiency and factor productivity. The question is: Are utilities making progress? And, which companies have gained a competitive edge? Which have not?
Industry analysts have long argued that given the structure of the markets they serve and their cost-based, rate-setting procedures, electric utilities tend toward monopolistic behavior.
California's three largest investor-owned electric utilities have submitted their proposals to the Federal Energy Regulatory Commission for implementing an independent system operator and power exchange for the state's restructured electric industry (Docket Nos. EC96-19-001 and ER96-1663-001).
Last November, the FERC had conditionally approved an "acceptable framework" submitted by Pacific Gas & Electric Co., San Diego Gas & Electric Co., and Southern California Edison (the trustee for the ISO and PX is S.
Enova/PE merger finds
California utilities learning
how to "micro-unbundle."
here's a meter war ticking away out West, pitting natural gas against electricity.
Enova Corp. is set to acquire Southern California Gas Co. through a merger with the gas utility's parent company, Pacific Enterprises. This strategy raises a tantalizing question: Can the new, merged company sell electricity "through" SoCalGas meters, using customer contacts on the gas side to grab market share in electricity from Southern California Edison, whose territory overlaps that of SoCalGas?
The Federal Energy Regulatory Commission allowed Ensource, a subsidiary of Pacific Enterprises, to cancel its authorization to engage in power marketing activities at market-based rates.
Intervenors protested that Ensource pursued the cancellation as a tactical maneuver to remove the proposed merger between Pacific Enterprises and Enova from FERC review. They claim that the merger applicants ultimately would resume Ensource's operations and make it part of a post-merger joint venture to market electricity, natural gas and energy-related services at market-based rates.
If truth is the first casualty of war, as we learned from author Mark Krebs ("It's a War Out There: A Gas Man Questions Electric 'Efficiency,'" December 1996, p. 24), then certainly the truth has been mutilated beyond recognition.
His article, which suggests that electric utilities have used conservation and demand-side programs improperly (to build electric load at the expense of natural gas!) is full of inaccuracies, misleading charts and other errors.
One of these days you may see a former chairman of the American Gas Association become the new chair of the Edison Electric Institute. Or maybe the other way around.
I broached this subject the other day when I found myself downtown at EEI headquarters on Pennsylvania Avenue, talking with some association reps.
About a year ago I stuck my neck out to predict that electric utilities might end up with stranded investment in transmission lines. I suggested that financial commodities trading-longs, shorts, and hedges-might supplant physical product movements. It's happened in natural gas, where the interstate pipelines have suffered from "decontracting" and capacity "turnback"-a phenomenon that has tended to move from West to East.
Despite a recent delay, the stage
appears set for online trading
in electric transmission capacity.
THIS IS ONLY A TEST (EM FOR NOW.
But come January, if all goes well, the OASIS program will start up in real time, with customers venturing onto the Internet to place reservations for capacity on the nation's electric transmission grid.