Inquiry Concerning the Commission's Merger Policy Under the Federal Power Act; Order on Reconsideration

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 2

[Docket No. RM96-6-001; Order No. 592-A]

Inquiry Concerning the Commission's Merger Policy Under the

Federal Power Act; Order on Reconsideration

Issued June 12, 1997.

AGENCY: Federal Energy Regulatory Commission.

ACTION: Order on reconsideration.

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SUMMARY: The Commission denies reconsideration of its Policy Statement

Establishing Factors the Commission Will Consider in Evaluating Whether

a Proposed Merger is Consistent With the Public Interest. In that

Policy Statement, the Commission said that it will generally allow 60

days for comments on a completed merger application. In response to

commenters who argue that 60 days will not be enough time to prepare

substantial comments on some merger applications, the Commission notes

that the Policy Statement establishes only a general policy, not a

binding rule, and states that it will lengthen the comment period in

specific cases when there is reason to do so.

FOR FURTHER INFORMATION CONTACT: Jan Macpherson, Federal Energy

Regulatory Commission, Office of the General Counsel, 888 First Street,

NE., Washington, DC 20426, (202) 208-0921.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of

this document in the Federal Register, the Commission also provides all

interested persons an opportunity to inspect or copy the contents of

the document during normal business hours in the Public Reference Room

at 888 First Street, NE., Washington, DC 20426.

The Commission Issuance Posting System (CIPS), an electronic

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CIPS is also available on the Internet through the Fed World

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Finally, the complete text on diskette in WordPerfect format may be

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Corporation. La Dorn Systems Corporation is also located in the Public

Reference Room at 888 First Street, NE., Washington, DC 20426.

Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A.

Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa,

Jr.

Inquiry Concerning the Commission's Merger Policy Under the

Federal Power Act; Order No. 592-A; Order on Reconsideration. Docket

No. RM96-6-001.

Issued June 12, 1997.

Introduction

The Commission recently issued a Policy Statement updating and

clarifying its procedures, criteria, and policies concerning public

utility mergers.1 Among other things, we set forth

procedures that are designed to allow our review of proposed mergers to

proceed as efficiently as possible and avoid unnecessary delays, while

ensuring that mergers are consistent with the public interest. This

order denies reconsideration 2 of our statement that we will

generally allow 60 days for comments on a merger filing. We conclude

that intervenors generally will be able to submit adequate filings

within that period. We will lengthen (or shorten) the comment period on

a case-by-case basis when there is reason to do so.

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\1\ Policy Statement Establishing Factors the Commission Will

Consider in Evaluating Whether a Proposed Merger is Consistent With

the Public Interest, Order No. 592, 61 FR 68595 (Dec. 30, 1996),

FERC Stats. & Regs. para. 31,044 (1996) (Policy Statement).

\2\ Policy statements are not subject to rehearing. See, e.g.,

Alternatives to Traditional Cost-of-Service Ratemaking for Natural

Gas Pipelines, 75 FERC para. 61,026 (1996) (rehearing does not lie

because policy statements are not directly reviewable; rather,

review is available when policy is applied in specific case), citing

American Gas Assoc. v. FERC, 888 F.2d 136, 151-2 (D.C. Cir. 1989)

(policies are not ripe until applied in specific cases). However, we

may, at our discretion, entertain reconsideration.

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Background

In the Policy Statement, we adopted an analytic ``screen'' to aid

in analyzing the effect of a proposed merger on competition. We

explained what information an applicant should submit to allow us to

apply the screen and thus to distinguish between those mergers that

require a more detailed analysis, which may include a trial-type or a

paper hearing, and those that clearly do not raise competitive

concerns. Applicants are expected to make available to the public all

data used in the screen analysis and other related data. If the screen

analysis shows that the merger would not significantly increase market

concentration and there are no interventions raising genuine issues of

material fact that cannot be resolved based on the written record, we

stated that we will not set the issue of the effect of a merger on

competition for hearing.

In the Policy Statement, we found that the analytic screen would

produce a ``reliable, conservative analysis of the competitive effects

of proposed mergers. However, it is not infallible.'' 3

Intervenors may, assuming their claims are substantial and specific,

challenge the data used or the way the applicants conducted the

analysis. They also may argue that the screen does not identify a

particular market problem. Moreover, we noted that intervenors may wish

to submit an alternative competitive analysis, accompanied by

appropriate supporting data. Recognizing that ``the need for more rigor

in interventions could require additional efforts by potential

intervenors,'' 4 we stated that we would routinely allow 60

days for comments on merger filings.5

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\3\ 61 FR at 68600, mimeo at 25.

\4\ 61 FR At 68600, mimeo at 26.

\5\ 61 FR At 68600, mimeo at 26.

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Arguments on Reconsideration

The Transmission Access Policy Study Group and the American Public

Power Association (TAPS/APPA) filed a request for reconsideration

6 in which they argue that 60 days may not be enough time to

produce the kind of substantial interventions the Commission is

expecting. They argue that if the Commission intends to rely on

interventions as the ``primary substantive basis (other than the self-

serving data provided by the applicants)'' for the Commission's

decision, 60 days is not enough time. When applicants submit data to

support their screen analysis, they naturally will

[[Page 33342]]

select data that shows the merger in the best possible light, and will

not reveal unfavorable data.

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\6\ Filed January 17, 1997. The filing is styled as a request

for rehearing, clarification, or reconsideration.

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TAPS/APPA also criticize the data we suggested applicants submit to

support their screen analyses.7 They argue that applicants

themselves would never assess a potential merger based only on these

data. For example:

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\7\ Policy Statement, mimeo at Appendix B.

[t]he complete heat rates of various units * * * which change by the

point of the output of the unit on the load curve, are not data

which are available on EIA Form 860, and the historical fuel costs

shown in FERC Form 423 are not likely to be the projected fuel costs

which would be used by any executive determining whether to commit

his or her company to a merger.8

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\8\ TAPS/APPA reconsideration at 8 (footnote omitted).

Unless the Commission decides in its planned rulemaking 9 to

require submission of all the data the company actually considered when

making the real-life decision on the merger, the screen analysis may be

misleading, according to TAPS/APPA.

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\9\ We noted in the Policy Statement that we will be issuing a

Notice of Proposed Rulemaking to set forth more specific filing

requirements and additional procedures. 61 FR at 68596, n.3.

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TAPS/APPA compare this Commission's decision-making under section

203 of the Federal Power Act to that of agencies acting under the Hart-

Scott-Rodino Act.10 They claim that the Commission will not

be collecting a large part of the information that these agencies

examine. For instance, the agencies require submission of all

information the applicants considered when deciding whether to

undertake the merger. Moreover, they can make a ``second request'' for

even more information. TAPS/APPA argue that the Commission should

require similar information. Specific information they say should be

required includes, for example, transmission studies applicants have

done that show various potential solutions to transmission constraints;

different ways the applicants considered calculating available and

total transmission capacity; information on vertical market power; and

information on power alternatives that may not be truly available in

the critical area because the power can be sold at a higher price

elsewhere.

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\10\ Hart-Scott-Rodino Antitrust Improvement Act of 1976, 15

U.S.C. 18a (1994).

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TAPS/APPA are particularly concerned that the 60-day period for

interventions will not be adequate if intervenors will be expected to

make a full-fledged case based on the limited information available.

They point out that the applicant will have had much more time than 60

days to prepare the filing and argue that it is unfair to expect a

complete, detailed response in 60 days. Finally, they suggest that the

Commission allow the clock to be stopped while discovery goes forward

and that intervenors be required to present their case 60 days after

all necessary information is submitted.11

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\11\ TAPS/APPA argue that the Commission should make it

mandatory for merger applicants who want expedited treatment to

serve potential intervenors with copies of the application by

overnight delivery and electronic versions as well. Potential

intervenors could be identified by having the applicants file a

notice of intent to file even before they file the application

itself; this would allow potential intervenors to identify

themselves.

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Discussion

At this time, we continue to believe that 60 days will generally be

enough time for adequate interventions. Intervenors are free to argue

that more time is needed in a particular case, and if we think more

time is needed, we will extend the comment/intervention

period.12 Moreover, the Policy Statement sets forth

suggested data only; we are free to request additional data in a

particular case, and have done so since the Policy Statement was

issued.13 In our upcoming rulemaking proceeding, we will

consider arguments as to what information should be required for

mergers, as well as arguments as to filing deadlines and other

procedural matters, since it is in that proceeding that we will propose

a binding rule.14

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\12\ We have stated our intention to shorten the comment period

in certain types of cases that raise minimal concerns, Enova

Corporation and Pacific Enterprises, 79 FERC para. 61,107 (1997),

and will be willing to lengthen the comment period as well when a

longer period is needed. See Pricing Policy for New and Existing

Facilities Constructed by Interstate Natural Gas Pipelines, Order

Denying Rehearing, 75 FERC para. 61,105 at 61,344 (1996) (issues

raised in requests for ``rehearing'' of Policy Statement are case-

specific in nature and should be addressed in individual cases).

\13\ Letter order of April 3, 1997 from Debbie Clark, Chief

Accountant, Federal Energy Regulatory Commission to Ohio Edison

Company, et al. in Docket No. EC97-5-000.

\14\ TAPS/APPA may raise in the rulemaking proceeding their

arguments that it should be mandatory for applicants who want

expedited treatment to make special service to potential

intervenors.

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TAPS/APPA also ask that in light of the dynamic nature of today's

industry, the Commission make it clear that we will not ignore factual

changes that occur while an application is pending. We do not intend to

ignore significant factual changes.

The Commission orders: The motion for reconsideration or

clarification is hereby denied in part and granted in part as set forth

in the body of this order.

By the Commission.

Lois D. Cashell,

Secretary.

[FR Doc. 97-16042 Filed 6-18-97; 8:45 am]

BILLING CODE 6717-01-P