[Federal Register Volume 61, Number 26 (Wednesday, February 7, 1996)]
[Proposed Rules]
[Pages 4596-4597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2548]



      
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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 61, No. 26 / Wednesday, February 7, 1996 / 
Proposed Rules  

[[Page 4596]]


DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Chapter I

[Docket No. RM96-6-000]


Inquiry Concerning Commission's Merger Policy Under the Federal 
Power Act

January 31, 1996.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of inquiry.

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SUMMARY: The Federal Energy Regulatory Commission requests comments on 
whether it should revise its criteria and policies for evaluating 
public utility mergers in light of fundamental changes in the electric 
industry and the regulation of that industry.

DATES: Written comments of no more than 50 pages, double-spaced, must 
be received no later than May 7, 1996.

ADDRESSES: Send comments to: Office of the Secretary, Federal Energy 
Regulatory Commission, 888 First Street NE., Washington, DC 20426.

FOR FURTHER INFORMATION CONTACT: Jan Macpherson, Office of the General 
Counsel, Federal Energy Regulatory Commission, 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 
this 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 
bulletin board service, provides access to the texts of formal 
documents issued by the Commission. CIPS is available at no charge to 
the user and may be accessed using a personal computer with a modem by 
dialing (202) 208-1397 if dialing locally or 1-800-856-3720 if dialing 
long distance. To access CIPS, set your communications software to 
19200, 14400, 12000, 9600, 7200, 4800, 2400 or 1200 bps, full duplex, 
no parity, 8 data bits, and 1 stop bit. The full text of this order 
will be available on CIPS indefinitely in ASCII and Wordperfect 5.1 
format. The complete text on diskette in WordPerfect format may also be 
purchased from the Commission's copy contractor, La Dorn Systems 
Corporation, also located in the Public Reference Room at 888 First 
Street NE., Washington, DC 20426.

I. Background

    The Federal Energy Regulatory Commission (Commission) requests 
comments on whether its criteria and policies for evaluating mergers of 
public utilities need to be revised in light of fundamental changes in 
the electric industry and the regulation of that industry.
    Under section 203 of the Federal Power Act (FPA),\1\ no public 
utility may dispose of, merge, or consolidate certain facilities under 
the Commission's jurisdiction without the Commission's approval.\2\ The 
Commission is to approve a merger if the merger is ``consistent with 
the public interest.''

    \1\ 16 U.S.C. Sec. 824b.
    \2\ In this order, we will refer to all such transactions as 
mergers.
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    The Commission presently analyzes proposed mergers by examining six 
non-exclusive factors that were set forth in Commonwealth Edison 
Company.\3\ These factors are:

    \3\ 36 FPC 927 (1996), aff'd sub nom. Utility Users League v. 
FPC, 394 F.2d 16 (7th Cir. 1968), cert. denied, 393 U.S. 953 (1968).
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    (1) the effect on the applicants' operating costs and rate levels;
    (2) the contemplated accounting treatment;
    (3) the reasonableness of the purchase price;
    (4) whether the acquiring utility has coerced the to-be-acquired 
utility into acceptance of the merger;
    (5) the effect on competition; and
    (6) the impact on the effectiveness of state and Federal 
regulation.
    Of these factors, the effects on costs and rates, and on 
competition, have been the most significant issues presented in recent 
merger cases.
    We have used the Commonwealth factors for almost thirty years. 
However, the industry and our regulation of it have changed 
significantly during that time, and even greater changes are likely in 
the future. As we explained in detail in our proposed Open Access 
rule,\4\ a variety of factors has created considerable competition in 
the generation market and structural changes in the industry itself. 
For instance, the advent of various non-traditional generating entities 
and the greater availability of transmission (brought about by the 
Energy Policy Act of 1992 \5\ and by certain utilities' ``open access'' 
filings) have allowed a great deal of competition, particularly in the 
market for new generation. Since the Open Access NOPR was issued, there 
have been further competitive changes. For example, thirty-one public 
utilities have filed transmission tariffs that provide varying degrees 
of open access; certain power pools have discussed adopting Independent 
System Operators (ISOs) or other structural changes;\6\ and the 
California Public Utilities Commission has issued an order directing 
restructuring of the electric industry in California to include a spot 
market power exchange, an ISO and retail access, among other things.\7\ 
With the final Open Access rule, non-discriminatory wholesale open 
access will be available on an even wider basis. This, in turn, will 
further increase competition.

    \4\ Promoting Wholesale Competition Through Open Access 
Nondiscriminatory Transmission Services by Public Utilities, 60 FR 
17662 at 17668-17675 (April 7, 1995), IV FERC Stats. & Regs., 
Proposed Regulations para. 32,514 at 33,057-33,069 (1995).
    \5\ 16 U.S.C. Secs. 824j-824l.
    \6\ Transcript of Commission's Conference on Power Pools Under 
the Open Access Proposal, vol. 1, pages 75 et seq. (New York Power 
Pool); 78 et seq. (New England Power Pool); 82 et seq. 
(Pennsylvania-New Jersey-Maryland Power Pool) (Dec. 5, 1995).
    \7\ D.95-12-063 (Dec. 20, 1995), as modified by D.96-01-009 
(Jan. 10, 1996).
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    In light of these fundamental changes, the Commission solicits 
comments on whether our criteria and policies for evaluating mergers 
need to be changed. We note that several entities commenting on the 
Open Access proposal argued that the policy needs to be updated. In 
general, these commenters are concerned that mergers may create ``mega-
utilities'' that will have market power in generation, particularly if 
these utilities are able to 

[[Page 4597]]
avoid the pancaked transmission rates that their competitors have to 
pay.\8\

    \8\ E.g., American Public Power Association initial comments at 
4, reply comments at 9-10; National Rural Electric Cooperative 
Association initial comments at 20-21; National Independent Power 
Producers reply comments at 5-6; Indiana Utility Regulatory 
Commission initial comments at 36-7.
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II. Public Comment Procedures

    The Commission invites all interested parties to submit an original 
and 14 copies of their comments. Comments should not exceed 50 pages, 
double-spaced, and should include an executive summary. Commenters 
should briefly describe themselves and should refer to Docket No. RM96-
6-000. They should submit a copy of their comments on a 3\1/2\ inch 
diskette in ASCII II format. Comments must be filed with the Office of 
the Secretary, Federal Energy Regulatory Commission, 888 First Street 
NE., Washington, DC 20426, no later than May 7, 1996. All comments will 
be placed in the Commission's public files and will be available for 
inspection in the Commission's Public Reference Section, 888 First 
Street NE., Washington, DC 20426, during regular business hours.

    By direction of the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 96-2548 Filed 2-6-96; 8:45 am]
BILLING CODE 6717-01-P