As utility takeovers break new ground, the FERC ponders proposed rules, perhaps already out of date.
A year ago, when U.S. Antitrust Czar Joel Klein talked of a "window of opportunity" for electric utility mergers, he didn't predict when it would close.
And it hasn't yet.
In the 12 months leading up to January 1998, when Klein had addressed the Federal Energy Regulatory Commission through its "Distinguished Speakers" series, only the ill-timed Primergy deal had been turned down. The next year, 1998, would prove no different. Even when a merger seemed to violate safe harbor rules, the commission would craft mitigation plans to let the deal go through. (See table, Ferc Filings: Approval Likely, with Shorter Delays.)
In the aftermath, some have decried the idea of "drive-by merger approvals."fn1 Others have argued that consolidation is inevitable - that deregulation will set off a search for a new equilibrium with higher market concentration.fn2 Klein, who has since moved on to pursue the Microsoft monopoly, wondered whether the FERC should go slow. "A moratorium," he said in his speech, would "postpone making difficult competitive evaluations for a brief period until we have developed a market-based history."fn3
The question today is whether the FERC can claim a policy that is both practical and adaptable. That inquiry grew more urgent as 1998 drew to a close, with the announcement in early December of two new merger deals that would break the mold: first, the takeover of PacifiCorp by Scottish Power PLC, and second, a merger of BEC Energy (parent of Boston Edison) and Commonwealth Energy System.fn4