By Robert J. Michaels
The Justice Department's Guidelines don't tell us very much about
today's (or tomorrow's) electric market.
However many electric utilities remain after this merger wave, competition will be forever changed.
Earlier this year, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) on merger policy, seeking advice on how to adapt old practices to a changing industry.1 Then, in July, it voted 3-2 to require a hearing on the proposed merger of Baltimore Gas & Electric and Potomac Electric Power.2 The majority expressed concern that applicants had defined relevant markets too broadly and inferred competition where market power might exist. The dissenting commissioners favored approval without hearing, noting that no intervenors had presented substantive claims that the merger would increase market power.
Whether or not the FERC proceeds to a more activist policy on mergers, it must reevaluate the methods it uses to determine their effects on competition.
Why Access Matters
In measuring market power, utilities, intervenors, and the FERC generally support use of the Horizontal Merger Guidelines developed by the U.S. Department of Justice.3 In today's environment, however, the FERC should question its continuing reliance on a tool that offers a particularly imprecise match for today's power industry.