September 26, 2000
Palm Springs, California
by
Attorney
Deborah Groban OlsonS
(with research assistance from Kimberly
Kefalas)
I.
Introduction
My purpose today is to
provide you, as labor leaders, with ammunition to protect your members and your
organizations as you deal with the new regulatory and economic environment that
encourages utility mergers. My paper will provide you with some background on
why utility mergers are increasing, and how the role and mindset of regulators
has changed in recent years. It will cover some technical information on merger
tests used by the regulatory agencies, which may be helpful to technical staff
in the audience, (which I won’t cover in the speech). My focus will be on
issues that unions should consider when facing a merger, and tools you can use
to provide leverage to deal with those issues.
These comments come from my research and experience representing a gas
workers' local in a merger of a gas company and an electric company, from a
general review of legal, business and labor literature concerning utility
mergers, and from my experience developing capital strategies for labor unions
over the past 20 years.
II.
Background
A.
Regulators’
role shifts from assuring supply and fair access to regulating competition over
bottleneck resources – from protecting the public to protecting competition
The regulatory paradigm has
shifted over past 25 years from regulation aimed at assuring regular and
non-discriminatory supply and acceptance of natural monopolies to one of
promoting competition and maximizing consumer choice. The regulators now view
the utilities as common carriers and focus on allocation of rights between
competing providers over bottleneck resources. The assumption of the new model
is that market forces will ensure adequate supply at reasonable prices. New
laws and regulations require direct, instead of indirect subsidies for
low-income and educational customers. However, these low-income groups have
less bargaining power now that their subsidies are no longer the quid pro quo
for monopoly rights.
i.
“Although
most federal barriers to inter and intrastate competition in the energy
industry have come down, heavy state and local regulation persists. Additional
regulatory layers are added when utilities are publicly traded or when they use
nuclear energy. Thus, much of the real merger work takes place in front of
regulatory agencies. Hearings become arenas in which competitors raise
obstacles that must be overcome at the same time the regulators are being
satisfied.”[1]
ii. “The original paradigm (of
regulation) was established over 100 years ago with the enactment in 1887 of
the Interstate Commerce Act. That paradigm was characterized by legislative creation
of an administrative agency whose task was to oversee an industry providing
common carrier or public utility services. The firms in the industry remained
privately owned, but they were closely monitored by the agency to ensure that
they provided services in standardized packages at standardized prices to all
similarly situated end-users and to ensure that those services were reliable.
To achieve the legal regime's goal of standardization in services and prices
("non discrimination"), providers were required to file their rates
and services with the agency in public tariffs from which no deviation was
permitted, and the agency reviewed complaints by end-users about these prices
and services. To promote reliability, the agency strictly limited entry and
exit in the industry and regulated rates so that providers earned adequate (but
not "excessive") profits. This legal regime has been giving way over
the last quarter-century to a very different paradigm. The new paradigm…instead
of striving for equality of treatment among end-users and reliability of
service …seeks to encourage multiple [*1326] providers to offer
different packages of services at different prices to end- users, on the theory
that competition among these providers will enhance consumer welfare. Thus, in
one regulated industry after another, we see a movement to eliminate tariffed
services in favor of contractual choice, to unbundle standardized packages of
services in order to allow end-users to select among different service
elements, and to eliminate restrictions on entry in order to encourage
competition among multiple providers. The role of the agency has been
transformed from one of protecting end-users to one of arbitrating disputes
among rival providers and, in particular, overseeing access to and pricing of
"bottleneck" facilities that could be exploited by incumbent firms to
stifle competition.” [2]
B.
Agencies
regulating utility mergers and their jurisdictions.
1)
Federal
Energy Regulatory Commission (FERC)
The Federal Energy
Regulatory Commission, formerly the Federal Power Commission, gets its
jurisdiction from the Federal Power Act[3]. It regulates the electric supply and
generation industry and electric company mergers in so far as companies engage
in interstate electric transmission or commerce.[4] It regulates the natural gas industry in so
far as the company transports natural gas via an interstate pipeline.[5] FERC has the ability to approve or
disapprove of all electric industry mergers over which it has jurisdiction via
the Federal Power Act. This, so far,
includes mergers of an electric supply company that sells electricity wholesale
with a natural gas supply company or other kind of business, although some
commentators believe that should be challenged.[6]
2)
State
Public Utility Commissions (PUC)
Generally,
state public utility commissions control retail sale and transmission of
electricity and gas. However, there are
frequently jurisdictional disputes about which agency controls in particular
cases. For example:
a. where gas and electric companies
seek mergers; [7] or
b. FERC involvement where retail rates are
affected and a state agency has authority.[8]
c.
Interested parties or state regulators challenge FERC’s assertion of so
much power. In so far as an electric company
is only involved in retail sales of electricity, the FERC has no jurisdiction
over it. In fact, courts have struck
down as unwarranted extensions of jurisdiction actions of the FERC involving
conditions for approving a merger that involved retail fixes (i.e., retail
price fixing), even if that “fix” was aimed at a wholesale problem.
d. Most natural gas suppliers are also subject more
to state regulation than to federal.
An article describing the merger of Pacific
Industries and Enova states, “From the outset, everybody knew the merger would
be made or broken at the Utilities Commission hearings, which began in May
1997. It was the only forum in which an evidentiary hearing would be held, and
the other agencies were to some extent willing to take their cues from the CPUC
decision. According to state [CA] law,
before it can approve a merger, the CPUC must be convinced that synergies which
function in both the public and the shareholders' interests will result. A
minimum of half the savings from those synergies must be passed along to the
ratepayers, and the quality of management and services must not be adversely
affected. ‘The reason the merger made sense,’ says LoBaugh, ‘was because
although we are the biggest gas company in North America, we are not an
electric company. We overlap several electric providers in our service area,
and to be in a position to compete in a deregulated electric market, we'd
concluded that we'd have to acquire the necessary infrastructure and expertise
through joint venture, partnership or merger.” [9]
3) A myriad of regulators
and interveners
Any utility merger faces a
myriad of potential regulators and interveners at all levels of government,
providing unions with many potential allies in a merger dispute. It also provides
leverage for the union with the potential merger partners who need all the
friends they can get. Every party calls the jurisdictional questions in the
manner most useful to themselves. For
example, states or municipalities are often interveners in applications for
merger approval. In order to merge,
utility companies often have to navigate a complex web of federal, state, and
local regulatory agencies, including State Public Utility Commissions, local
ordinances, the FERC, and the US Department of Justice (DOJ) and the US Federal
Trade Commission (FTC). In addition,
there are usually numerous interveners on behalf of the public interest either
supporting or opposing any merger.
Often these interveners are municipalities, ad-hoc consumer groups, the
potential competition for the future merged corporation, and even labor unions.
4) Companies grappling with deregulation seek
mergers to maintain advantages of size while sidestepping the regulators
current definitions of unfair concentration of market or bottleneck resources.
a. Companies, which
formerly held what regulators permitted as “natural monopolies” in the
interests of providing good service at good prices, are now expected to provide
those services via free market. Formerly regulated monopolies are now required
by FERC to share their transmission facilities or sell at wholesale prices to
former competitors.
b. Some mergers of
neighboring electric companies have been disallowed, even where they would
provide for significant cost savings, because together they would monopolize an
electric grid, which now must save room for other competitors.
c. Electric and gas mergers
are popular because they are not selling same product. These mergers can retain
the economic power of size, without running the risk of becoming the sole user
of an electric grid that must be shared. There are numerous companies that are
both electric and gas companies. In these cases it is hard to show the merger
results in squeezing out competition if the companies weren’t competing in the
first place. Divestiture of certain
assets is often required in such gas and electric mergers to avert potential
anticompetitive effects.[10]
A potentially interesting argument could be made that such a merger squelches
competition because it takes away the potential for competition between the
pre-merger companies. For example, if a
gas and electric merger effectively cuts off any chance of the gas company
branching off into the electric supply business or the electric company
branching off into the gas supply business, which would be a source of
competition, and would seem to be possible because of new “facilities sharing”
rules meant to encourage such extensions of product marketing.
5) FERC and
changing merger guidelines
a. The purpose of the FERC 1996 Policy
Statement[11] regarding
the imminent amendment of regulations to update and clarify procedures and
policies concerning public utility mergers in the light of changes in the
regulation of the electric power industry, is to ensure that mergers are
consistent with the public interest and to provide greater certainty and
expedition in the Commission’s analysis of merger applications.
b. The Energy Policy Act of
1992[12]
permitted new power suppliers, called exempt wholesale generators, to enter
wholesale power markets, and expanded the Commission’s authority to require
transmitting utilities to provide eligible third parties with transmission
access.
c. Commission’s Open Access Rule[13],
adopted in 1996, requires that each public utility that owns, operates or
controls interstate transmission facilities to file an open access transmission
tariff that offers both network and point-to-point service. The rule is designed to remedy the undue
discrimination that is inherent when a utility does not offer truly comparable
transmission service to others, and to promote competitive bulk power
markets. FERC, in its 1996 Policy
Statement, also stated that many states are contemplating retail access--and
that was in 1996. Since then, state utility commissions have
begun authorizing retail access. According to www.utlityconnection.com there are 42 different customer choice
programs underway in a variety of states. Michigan provides one recent example.[14]
d. Federal Power Act
standard that the merger contemplated must be consistent with the public
interest, must account for changing market structures and pay close attention
to the possible effect of a merger on competitive bulk power markets and the
consequent effects on ratepayers. Section 203 of the Federal Power Act provides
that no public utility shall sell, lease, or otherwise dispose of the whole of
its facilities that are subject to the Commission’s jurisdiction, or any part
thereof with a value in excess of $50,000, or by any means whatsoever, directly
or indirectly, merge or consolidate such facilities with those of any other
person, or purchase, acquire, or take any security of another public utility
without first securing the Commission’s approval.
1. Under its 1996 Policy
Statement, FERC moved away from its traditional “hub and spoke” method for
measuring market concentration. This method looked at the number of utilities
with which the applicant connected, and the effects of the merger on the access
of these utilities to the grid after the merger. FERC now requires more
detailed economic and market data, and will approve without hearing mergers,
which meet the Department of Justice, and Federal Trade Commission Horizontal
Merger Guidelines (Guidelines).[15] FERC will generally take into account three
factors in analyzing proposed mergers: the effect on competition, the effect on
rates, and the effect on regulation.
2.
Regarding
the effect on Competition, the FERC Policy Statement adopted the DOJ/ FTC
Merger Guidelines as the analytical framework for examining horizontal market
power concerns. The Guidelines set forth a five-step merger analysis:
(1) define markets likely to be affected by the merger
and measure the concentration and the increase in concentration in those
markets;
(2) assess
whether the merger, in light of market concentration and other factors that
characterize the market, raises concern about potential adverse competitive effects;
(3) assess whether entry could mitigate the adverse
effects of the merger;
(4)
assess whether the merger results in efficiency gains not achievable by other
means; and
(5)
assess whether, absent the merger, either party to the merger would likely fail,
causing its assets to exit the market.[16]
3.
Effect
on Rates: applicants are required to propose appropriate rate protection for
consumers (Note, this is for wholesale consumers.)
4.
Effect
on Regulation:
i. It shifts merger regulation to SEC where the applicants
will be part of a registered public utility holding company and can commit to
still abide by FERC’s policies with regard to affiliate transactions. Otherwise
FERC will set the issue for hearing (i.e., whether or not to grant the merger).
ii. Where a state commission has authority to act
on the merger, FERC intends to rely on the state commissions to exercise their
authority to protect state interests.
5.
Mergers
that do not pass these tests, and when arrangements to make them satisfactory
(this is called the market power test) will be set for a trial-type
hearing. Also, when the FERC thinks it
would be in the public interest, they can impose various remedies to move the
merger along.
6.
Although
they expect that most mergers will fulfill all three requirements (i.e.,
post-merger market power will be in acceptable thresholds or be satisfactorily
mitigated, acceptable customer protections must be in place, and any adverse
effect on regulation must be addressed), there could be circumstances in which
a merger will result in severe market power problems but would still be in the
public interest, etc.
7.
Note:
changing industry results in mergers that are differently structured, i.e.,
mergers between public utilities and natural gas distributors and pipelines,
consolidations of electric power marketer businesses with other electric or gas
marketer businesses, etc. These would
not have a competitive impact, because there can be no increase in the
applicant’s market power unless they are selling relevant products in the same
geographic market.
8.
In
1998, FERC issued a Notice of Proposed Rulemaking[17]
in which it fine tuned the horizontal market power test and adopted a vertical
market power test. It also created a computer simulation model and sought to
lessen the information burden on mergers.
1. Successorship
2. Job
Protection - layoffs
3. Pension and Benefit Protection
4. Ownership of Stock in Merging Companies
5. Occupational Safety and Health
6. Preservation of Bargaining Unit -Accretion
a)
work
sharing
b)
correct
collective bargaining unit
7. Higher
utility cost and loss of service for working families
B. Labor law and collective bargaining
This
presentation will not focus on the basic collective bargaining tools because
all of you are quite familiar with them. I provide them here as part of a
checklist of items to use, and include special issues to consider and
information to request in relation to them.
1.
Merger
agreements may not cover union successorship or job preservation.
2.
It
is important to review company securities filings to determine what they are
telling the public about the future of the union’s, collective bargaining agreements
and benefit plans. Their promises about
job retention, maintenance of benefits or maintaining the status quo in other
areas may be very short term. The SEC filings provide the union an opportunity
to view information on the company’s intentions that is usually not available
in print.
3.
Promises
from the party with whom you have a collective bargaining agreement may not
cover the company remaining after the merger, if your company is the one being acquired.
Make a demand to your company to get the ultimate acquiring company to adopt
your collective bargaining agreement.
4.
Pay
special attention to pension and benefit plans into which your existing pension
and benefit plans may be merged.
5.
Because
these are regulated industries you may have leverage beyond your normal
bargaining leverage, if you choose to enter the regulatory arena at the state
Public Utility Commission or FERC level.
1. Stock swaps and ESOPs
It is common for utility company employees
to own company stock in an ESOP or similar pension plan. In a merger there is
usually an agreement to swap the shares of the company that will cease to exist
for the shares of the remaining or new company. Often this will be at a pegged
or collared rate, which may not continue to fluctuate with the market.
Sometimes shareholders will be entitled to swap some (but not all) of their
stock for cash. For ESOP participants the cash swap may only be for a brief
time, after which the Plan will be required to purchase new company stock. Many
ERISA and securities issues may arise in these circumstances. A union has a
variety of matters it should consider for its members in these circumstances.
a.
Is the merger
beneficial to the shareholders? Are there reasons why this merger is not
beneficial to members as shareholders and might not be beneficial to other
friendly institutional shareholders who might share the Union’s concerns? You may be able to find other union pension
plans that invest in your company through your international union or the
Center for Working Capital.
b.
Who will
decide whether to swap the stock, at what price and based on what information?
Plan trustees may be company executives who are protected by a
golden parachute in the merger. They may try to avoid fiduciary liability for a
sale or swap decision by hiring an outside trustee to make the decision. The
union can raise questions on behalf of its members about: 1) potential conflicts
of interest the trustees may have; 2) the quality and timeliness of information
being made available to the participants in directing the trustees; 3) the
process being used by inside or outside trustees to make decisions about sale
or swap of participant stock
c. The right answer to the stock vs. cash
decision may be different for different members of a single bargaining unit.
Differences in age, seniority, retirement plans, family size and income may
lead to differences in stock basis and capital gains treatment of stock
transferred. These differences can have
significant tax and income consequences for your members. An ERISA trustee is
unlikely to volunteer to calculate this information for your members, but you
may be able to require them to provide it if the members request such
assistance from them.
2.
ERISA
rights and duties:
a. The ESOP
trustees have primary responsibility for ensuring that the ESOP participants
get a deal that is in their best interests, prudent and that the stock they sell
or swap trades for at least fair market value.[18]
b. Pass
through voting - Generally the shareholder vote on whether to merge belongs to
the trustee and can only be passed through to participants if the plan give
that right to the participants, and if the trustees ensure that the
participants receive sufficient unbiased information in adequate time to make
an informed and rational choice.[19]
For those participants who do not vote, or where the majority of the employee
stock is unallocated, the decision on the majority of the stock may rest with
the trustees alone.
i. Adequate Information to make an informed decision: The
individual participant decision on whether to swap or tender shares may be
passed through to the participants if the plan gives that right to the
participants and if the trustees ensures that the participants receive
sufficient unbiased information in adequate time to make an informed and
rational choice. For those participants who do not vote, or where the majority
of the employee stock is unallocated, the decision rests with the trustees
alone.
ii. Trustee conflict of interest may also give you leverage.
The pension committee for a utility company is often made up of top officers in
the company. They may be getting golden parachutes, etc. as part of a merger
deal. The potential conflict created between their personal benefit and any
compromises being asked of a pension plan or its participants may make them
particularly vulnerable to challenge on questions of fiduciary breach.
3. ERISA duties and the Union
The union is usually not the plan trustee,
but may have to take the role of watchdog to ensure that the trustee does
his/her duties. Trustees may try to avoid providing some useful information in
order not to be liable for providing investment advice. The union can pressure
the Trustees to do their job by raising questions with the Trustees (inside and
outside) and, if necessary, with the US Department of Labor (DOL), about
whether the choices and information available to the participants meet the
ERISA standards outlined above. The union has much more negotiating room if it
works these issues out with the trustees without the intervention of the DOL.
E. Consider making some new friends – Citizen
Utility Boards (CUB)s
1.
CUBs
exist in many states as the advocacy agencies for utility consumers.
2.
CUBs
see labor generally siding with management when they ask for rate hikes, but
occasionally make common cause when a merger has the potential for damaging
both consumers and workers.
3.
As
deregulation is making energy supply more unstable, CUBs may be as
concerned as unions about stability and
not just price. It is wise to begin exploring these relationships before a
crisis arises.
Mergers
based on market competition provide you with opportunities to raise questions
with health and safety regulators about whether the utilities involved are
planning actions that will risk public or worker safety. The AFL-CIO raised these issues in its 1999
resolution on Quality of Service Standards for Utilities. On Sept. 17, 2000 there was a front-page
story in the NY Times about a Central Maine Power lineman killed while
working excessive overtime (working for most of 2 ½ straight days with 5 hours
of sleep). The State of Maine passed the first law in the US limiting required
overtime. I don’t know if a utility merger was involved here. But the impact of
this, and similar stories, can be a basis for involving other agencies and
legislatures in the debate about the public safety aspects of a merger.
1. Who can
intervene?
Any “interested party”:
interveners have included unions, state utility commissions, cities, counties,
and other municipal organizations, competing utilities, subsidiaries of
companies or holding companies that are parties to the merger, consumer
counsel’s or consumer protection groups, citizens’ coalitions, environmental
groups, etc. (NOTE: when environmental groups or unions intervene, they usually
concentrate on the issues about which the FERC has stated its concern. The FERC is not concerned with the effects
of a merger on workers or labor, and only minimally concerned with the
environmental effects (as this is covered by other regulatory agencies)).
“FERC is required to provide all interested parties
with an opportunity to contest the merger and due process rights to a hearing
on material factual disputes, including a trial-type hearing in certain cases.”
[20]
2. What
kinds of concerns can interveners raise in the public interest to stop approval
of a merger?
Any intervener can present evidence
or raise concerns that:
a. market
share/ concentration analysis done by the merging parties is wrong;
b. the
merged company’s market power would allow it to manipulate the market and or
prices of the products, control the ability of competing companies to have
access to transmission or pipelines, control demand and or delivery in a given
region, or have too much access to privileged information that would give them
an edge in the market;
c. merger
agreement gives insufficient information about the protections the merged
company will put in place to avoid harm to consumers on both retail and
wholesale level;
d. costs
outweigh benefits/ alternatively, insufficiently explained plans for
distributing benefits among profit and consumers/ merged company will pass on
costs but not benefits of merger to the public;
e. adverse
effects on supply – Example – The summer of 2000 blackouts and brown outs in California,
and the huge price spikes at peak usage times is causing consumers, energy
dependent businesses and legislators to question the wisdom of deregulation.
(See attached NY Times 9/15/00 article);
f. adverse
effects on financial markets.
States can request assistance with retail concerns or other
issues of state jurisdiction. But if they don’t, and the FERC has no reason to
be concerned that they won’t examine the merger as well (i.e., the state
doesn’t give its public utility commissions the ability to disapprove mergers
in the public interest) then the FERC is unlikely to buy arguments that a
merger adversely affects the retail market.
3)
What
can a Union do to challenge a merger as an intervener?
a. Challenge the merger as failing to meet FERC standards
and guidelines; not in public interest, monopoly, etc
b. Join with groups of low-income, educational
consumers on subsidy, consumer utility boards or others who question the
likelihood that the proposed merger or deregulation will lower prices and
continue to provide a dependable supply of energy.
c. Time is often on your side. Demand a hearing
before the FERC and/or the state public utility commission. Any of these may
drag out the process of approval. A merger that looks great to the parties in
2000 might not look the same in 2002. FERC seems very friendly to these mergers
and will only grant a hearing if there is the potential for actual harm and if
the harm is linked to the merger. So you must have evidence.
d. Shareholder derivative
suits for union members who have stock plans.
e. Join with concerned municipalities (who are
often concerned about retail pricing and jobs) and do whatever can be done to
stall the merger or put obstacles in the way of it being completed in a timely
fashion.
i.“During the attempted merger with Edison, the San
Diego City Council went so far as to pass a municipal ordinance giving it
authority to approve or disapprove any merger or acquisition of SDG&E. Most
of the attorneys involved in the process, including those representing various
third-party interveners, agreed that the ordinance was probably contrary to the
state's constitution, but the simple fact that it was on the books became a
major obstacle to the merger.” [21]
ii. Bring different concerns to other agencies:
SEC, EPA, Nuclear regulatory agencies if a nuclear power plant is involved.
4) Do you
want to be an intervener?
There are many examples of unions supporting
companies seeking mergers after obtaining strong “no layoff” promises, after
raising the possibility of or actually opposing mergers. I suggest that you dig
into all the information such a merger makes available concerning, pensions,
stock plans, safety, utility costs and other matters that may affect your
members, and use your leverage to maximize all these interests.
5) Is it worthwhile to be a shareholder?
Shareholders
must vote to approve mergers or they cannot happen. In addition to any
financial benefits your members may receive as shareholders, stock voting
rights may be useful in the shareholder arena as well. Generally employee
shares are not sufficient to block a merger in a public company. However, in conjunction with other concerned
shareholders, their rights to information and a vote may provide additional
leverage.
Utility mergers can be horribly complex, but they
offer unions a wide variety of strategic options to achieve the union’s ends.
Regulatory agencies and legislatures are rapidly changing their views about
their role(s) in regulating utilities. The increased value regulators place on
competition over secure and non-discriminatory supply is increasing the rate of
utility mergers. Simultaneously, there is increasing citizen and legislative
concern about the impact of these mergers on society.
Union member are at risk of job, pension and safety
losses in this process. Labor has social leverage it can use to protect its
members in their dual roles as workers and consumers. In order to timely and
successfully conclude much needed mergers, companies need to make peace with
labor. They don’t want you intervening against a merger. But you may also find
common cause with citizen utility boards or environmental groups raising issues
about safety and access to service that resonate with your members. While you
are carefully assessing the potential effects of a merger on your members’
jobs, pensions and safety, you should keep lines of communication open with all
parties to a merger, and possible interveners.
This is one of several areas where labor has new capital strategies and
tools to add to the old familiar ones.
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à This outline is not intended and should not be sued as legal advice for any specific situation. The applicable rules are very complex and fact sensitive. Action in these matters should be undertaken only upon advice from legal counsel reviewing the specific facts and circumstances.
S Atty. Deborah Groban Olson, has over 19 years experience specializing in employee ownership and equity compensation programs including ESOPs, stock options, and corporate transactions, for companies, unions, trustees, and employees, serving as corporate or ESOP counsel and advising unions on capital strategies. She is special counsel to Gas Workers Local 8O concerning the merger of DTE and MCN. Olson is of counsel with the business law firm of Jackier, Gould, Bean, Upfal & Eizelman, P.C. in Bloomfield Hills, MI. She serves as Board Chair of the National Center for Employee Ownership (NCEO), and chairs the Capital Ownership Group. Phone: (313) 964-2460 or (313) 331-7821; Email: dgo@EsopLaw.com; Website: www.EsopLaw.com.
[1] Rubenstein, Bruce, “Anatomy of a merger: Former CG Says Deal would have Failed if Left to Outside Counsel” Corporate Legal Times, November 1998.
[2] Kearney, Joseph and
Merrill, Thomas “The Great Transformation of Regulated Industries”, 1998 Columbia
Law Review 1323 at 1326 notes 5 & 6.
[3] 16 USC Sec.824 et seq. (1994)
[4] Federal Power Act, 16 U.S.C. 824d, 824e (1994).
[5] Natural Gas Act, 15 U.S.C. 717c, 717d (1994)
[6] Rokach, Joshua Z. “ Scrutinizing FERC’s Policy Statement: The Latest in Merging”, Legal Times, February 17, 1997, Monday, ENERGY LAW Section Pg. S39.
[7] “Another complexity concerns mergers between electric
utilities and natural gas companies. If FERC has jurisdiction, the Policy
Statement explicitly applies the same criteria to electric/gas mergers as to electric/electric
mergers. But whether FERC has jurisdiction at all over electric/gas
transactions remains under challenge.” See Note 3 above Pg. S39.
[8] “The record in
the instant proceeding includes evidence that the merger may have
impacts on retail competition. For example, the record indicates that
Constellation would control 100 percent of the market for firm energy and
between 80-88 percent of the market for non-firm energy if retail access became
available in Applicants' service territories. See supra n.42. We believe that
these concerns merit consideration. However, under the facts of this case we
believe this issue is appropriately addressed by the DC and Maryland
Commissions. Both the DC and Maryland Commissions state that they have
initiated proceedings to thoroughly investigate both the proposed merger and
the myriad issues surrounding retail competition generally in their respective
jurisdictions. In the Merger Policy Statement we stated: In cases where a state
commission asks us to address the merger's effect on retail markets because it
lacks adequate authority under state law, we will do so. In light
of the ongoing proceedings before the DC and Maryland Commissions, their
comments stating that they are capable of addressing any and all retail related
issues, and their specific requests that we not consider such issues, we will
not address them further. No party has alleged that the state commissions lack
adequate authority to address all retail related issues or raised any
compelling reason for the Commission to address these issues.”79 FERC ¶61,027, Baltimore
Gas and Electric Company and Potomac Electric Power Company, Docket Nos.
EC96-10-000 and ER96-784-000}, (Apr. 16, 1997).
[9] See Note 1 above.
[10] The US Department of Justice issued a “consent decree permitting the merger of a California electric utility and the state’s dominant natural gas transportation and storage company, subject to conditions …(1) that the electric utility divest two low-cost gas-fired electricity generation facilities and (2) that the combined entity obtain prior government approval before acquiring other low-cost gas-fired plants and accept government monitoring of other power management contracts sufficiently limited the combined entity’s incentive to raise prices and limit competition in the electricity generation market.” United States v. Enova Corp., US Dist. Ct D.C. Civ. Action No. 98-583(RWR), CCH Trade-Regulation 2000-2 Trade Cases Para.72,964 (June 29,2000).
[11] Inquiry
Concerning the Commission’s Merger Policy Under the Federal Power Act: Policy
Statement, Order No. 592, FERC Statutes and Regulations ¶31,044
(1996), order on reconsideration, 78 FERC ¶61,321 (1997).
[12] Energy Policy Act
of 1992, Pub. L. No. 102-486, 106 Stat. 2776 (1992).
[13] The Commission's Open Access Rule Promoting Wholesale
Competition Through Open Access Non-Discriminatory Transmission Services by
Public Utilities and Recovery of Stranded Costs by Public Utilities and
Transmitting Utilities, III F.E.R.C. Stats. & Regs. P 31,036
(1996)
[14]
On August 17, 2000, the Michigan Public Service Commission today increased
customer choice for Michigan's electric customers, approving licenses for seven
alternative electric suppliers to sell electric generation service to Michigan
retail customers. Nordic Electric,
L.L.C., CMS Marketing, Services and Trading Company, DTE Energy Marketing,
Inc., Quest Energy,L.L.C. Engage Energy US, L.P., Nordic Marketing LLC and CMS
MS&T Michigan L.L.C. were granted a license under the Customer Choice and
Electricity Reliability Act of 2000.
Public Acts141 and 142 of 2000 was signed into law Governor John Engler
on June 3, 2000. The new law allows the
vast majority of retail customers of electric utilities to choose an
alternative supplier by January 1, 2002. The Commission found that the
applications were in the public interest and that competition for electric
service can be advantageous for Michigan citizens. The Commission concluded that approval of the alternative
electric supplier licenses would expand the opportunities for competition. The Commission approved these licenses
conditioned on compliance with all applicable provisions of the acts, and
failure to comply fully may result in revocation of the license or other
penalties.
[15] 9
U.S. Department of Justice and Federal Trade Commission, Horizontal Merger
Guidelines, 57 Fed. Reg. 41,552 (1992), revised, 4 Trade Reg. Rep.
(CCH)¶13,104 (April 8, 1997).
[16] See Note 8 above, (Policy
Statement) at p. 30,128.
[17] 63 F.R. 20340
[18] 29 USC Secs.1104 and 1108 (e)
[19] Department of Labor’s Advisory Opinion in Carter Hawley Hale (CCH Pension Plan Guide Para.23,653F) and Herman v. NationsBank, 126 F.3d 1354 (11th Cir. 1997).
[20] Naeve, Clifford M. and John S. Moot, “Merging
Made Easy” in Developments in Energy Law section of the April 13, 1998 Legal
Times.
[21] See Note 1 above.