[Federal Register Volume 64, Number 58 (Friday, March 26, 1999)]
[Notices]
[Pages 14725-14727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7403]


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FEDERAL TRADE COMMISSION

[File No. 9910046]


CMS Energy Corp.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the

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consent agreement and the terms of the consent order--embodied in the 
consent agreement--that would settle these allegations.

DATES: Comments must be received on or before May 26, 1999.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Frank Lipson or Mark Menna FTC/H-2105, 
600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-2617 or 
(202) 326-2722.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's rules of practice (16 CFR 2.34), notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of sixty (60) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for March 19, 1999), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-3627. Public comment 
is invited. Such comments or views will be considered by the Commission 
and will be available for inspection and copying at its principal 
office in accordance with Sec. 4.9(b)(6)(ii) of the Commission's rules 
of practice (16 CFR 4.9(b)(6)(ii).

Analysis of Proposed Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted from CMS 
Energy Corporation (``CMS'' or ``Proposed Respondent'') an Agreement 
Containing Consent Order (``Proposed Consent Order''). The Proposed 
Consent Order remedies the likely anticompetitive effects in the market 
for pipeline transportation of natural gas into parts of Michigan 
arising from certain aspects of the proposed acquisition by CMS of all 
voting securities of Panhandle Eastern Pipeline Company 
(``Panhandle''), Panhandle Storage Company, and Trunkline LNG Company 
(``Trunkline''), now held by Duke Energy Company (``Duke''), its 
subsidiaries or affiliates.

II. Description of the Parties and the Transaction

    CMS is a corporation organized, existing, and doing business under 
and by virtue of the laws of the State of Michigan, with its office and 
principal place of business at 330 Town Center Drive, Dearborn, 
Michigan. CMS is a holding company for its principal subsidiary, 
Consumers Energy Company (``Consumers Energy''). Consumers Energy is a 
combination electric and gas utility company that serves customers in 
broad sections of Michigan.
    Duke is an integrated energy and energy services provider. Duke 
delivers and manages electricity and natural gas throughout the United 
States and abroad. Duke's Natural Gas Transmission segment is involved 
in interstate transportation and storage of natural gas for customers 
primarily in the Mid-Atlantic, New England and Midwest states. Duke's 
earnings before interest and taxes for the three months ending 
September 30, 1998, were $870.9 million.
    Duke owns 100 percent of Panhandle Eastern Pipeline and Trunkline 
Pipeline, both of which are natural gas pipelines regulated by the 
Federal Energy Regulatory Commission (``FERC'') Panhandle originates in 
the producing fields of Oklahoma and moves natural gas in a 
northeasterly direction from Oklahoma into Michigan. Trunkline 
originates in the Gulf Coast and transports gas produced from offshore 
Gulf Coast wells north to the Midwest. Trunkline terminates at the 
Michigan border. Both Panhandle and Trunkline interconnect with 
Consumers Energy.
    Respondent CMS entered into a Stock Purchase Agreement dated as of 
October 31, 1998, with PanEnergy Corp. and Texas Eastern Corp., 
subsidiaries of Duke, to acquire all voting securities of Panhandle 
Eastern Pipe Line Company, Panhandle Storage Company, and Trunkline LNG 
Company for $1.9 billion plus the assumption of $300 million in debt.

III. The Proposed Complaint and Consent Order

    The Commission has entered into an agreement containing a Proposed 
Consent Order with CMS in settlement of a proposed complaint alleging 
that the proposed acquisition violates section 5 of the Federal Trade 
Commission Act, 15 U.S.C. 45, and that consummation of the acquisition 
would violate section 7 of the Clayton Act, 15 U.S.C. 18, and section 5 
of the Federal Trade Commission act. The proposed complaint alleges 
that the acquisition will lessen competition in the pipeline 
transportation of natural gas into Consumer Energy's gas service area 
(the ``Service Area''). The Service Area includes all or portions of 54 
counties in the lower peninsula of Michigan. Principal cities served 
include Bay City, Flint, Jackson, Kalamazoo, Lansing, Pontiac, and 
Saginaw.
    Consumers Energy receives natural gas through interconnections with 
Panhandle and Trunkline as well as other pipelines in which Consumers 
Energy will have no financial interest after the proposed acquisition. 
The proposed compliant alleges that Consumers Energy can unilaterally 
decide to reduce the interconnection capacity or close the 
interconnection altogether. The proposed complaint alleges that after 
the acquisition, CMS will have an incentive to close or reduce the 
interconnection capacity with the non-CMS pipelines. This action is 
likely to increase demand for transportation service on Panhandle and 
Trunkline and enable these pipelines to increase their rates. The 
proposed compliant also alleges that such a rate increase may also 
affect customers' natural gas prices and electricity prices in the 
Service Area.
    To remedy the alleged anticompetitive effects of the proposed 
acquisition, the Proposed Consent Order allows a shipper to use another 
interconnection on the Consumers Energy system if the shipper does not 
incur increased costs. Alternatively, the Proposed Consent Order 
requires CMS to supply gas from its own system to any shipper to which 
CMS refuses transportation because of reduced interconnect capacity. 
The shipper would have to return the borrowed gas, but not earlier than 
the end of the calendar month following the month in which CMS reduced 
interconnect capacity.

IV. Resolution of Antitrust Concerns

    Consumers Energy, a CMS subsidiary, is the franchised monopoly 
provider of local gas distribution services to residential, commercial 
and industrial customers in large parts of Michigan. Gas enters the 
Consumers Energy's intra-state transmission system at interconnections 
with Trunkline, Panhandle and other pipelines (mainly, those owned by 
ANR, Great Lakes and Michigan Consolidated Gas). While Consumers Energy 
is the local distribution monopolist, it must offer transportation to 
other firms on its transmission system. In this manner, it competes 
with other companies in the

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sale of natural gas to customers on the Consumers Energy system.
    Consumers Energy controls the operation of its system, including 
its capacity to receive gas at pipeline interconnections. Currently, 
Consumers Energy, as a purchaser of interstate transportation services, 
has the incentive to maintain competitive access to its intra-state 
system to maintain maximum flexibility and minimum prices for the gas 
delivery. In fact, prices on both Panhandle and Trunkline are 
substantially below the maximum permitted by FERC. After the 
acquisition, however, CMS would have the incentive to restrict access 
to the Consumers Energy system by non-CMS pipelines to support higher 
post-acquisition transportation prices on Trunkline and Panhandle. CMS 
could restrict the access non-CMS pipelines have to the Consumers 
Energy system by reducing the capacity of the interconnections that 
service those pipelines. It is unlikely that either State or Federal 
regulatory agencies have the authority to interdict this behavior.
    The resulting increase in the price of natural gas transportation 
into the Consumers Energy system would likely increase the price of gas 
sold to customers in the Service Area. In addition, the proposed 
acquisition is likely to adversely affect industrial plants locate in 
the Service Area that rely on natural gas as a feedstock to generate 
their electricity. Increased gas transportation rates are likely to 
increase the cost of self-generation and may force these plants, 
instead, to purchase electric power from Consumer Energy.
    The Proposed Consent Order is designed to prevent CMS from 
restricting or eliminating the interconnection capacity available to 
competing pipelines. The Proposed Consent Order identifies a designated 
capacity for each interconnection based on historical usage to maintain 
non-CMS capacity at current levels. CMS may adjust the designated 
capacity for reasons related to force majeure or routine maintenance, 
resulting in an adjusted designated capacity for each 
interconnection.\1\
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    \1\ The Proposed Consent Order refers to these measures as 
``Designated Capacity'' and ``Adjusted Designated Capacity.'' The 
Proposed Consent Order refers to actual capacity as ``Available 
Interconnection Capacity,'' meaning the amount of natural gas that 
Consumers Energy is ready, willing and able to receive at a non-CMS 
interconnection. Exhibit A to the Proposed Consent Order lists the 
eight non-CMS interconnection points at issue, along with the 
Designated Capacity of each interconnection.
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    The Proposed Consent Order requires CMS to give shippers two 
options if they cannot deliver gas into Consumers Energy's service area 
because the available interconnection capacity is less than actual 
capacity for any reasons other than force majeure or routine 
maintenance. First, if the shipper is able to nominate its shipments to 
another pipeline interconnection point into the Consumers Energy system 
at no additional cost to the shipper, CMS will accept the gas at such 
other pipeline interconnection point. Second, if the shipper would 
incur additional cost in delivering at another interconnection point, 
or if no other interconnection point is available to the shipper, CMS 
will provide gas from its own supply of gas and without interruption on 
the Consumer Energy system for the shipper's account equal to the 
volume of gas nominated by the shipper that could not be transferred 
through any of the interconnection points. The shipper must return the 
gas to Consumers Energy without penalty by the end of the month 
following the month in which CMS provided gas in offset to the 
shipper's blocked gas.\2\
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    \2\ The procedure is iterative in that the process repeats 
itself if Consumers Energy declines a shipper's return of gas 
because actual non-CMS interconnection capacity is less than current 
capacity, thereby giving the shipper additional time to settle the 
offset with Consumers Energy.
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    The Proposed Consent Order requires CMS to post to an electronic 
bulletin board information which will let shippers know whether actual 
capacity is less than current capacity at non-CMS interconnects. 
Specifically, the Proposed Consent Order requires Consumers Energy to 
provide (for each interconnection point) the current capacity, current 
capacity as adjusted for maintenance and force majeure conditions 
(including the cause of the adjustment and the date it is expected to 
end), actual capacity, shipments nominated and confirmed (no later than 
the second business day of each month), and throughput for the previous 
month.\3\ This information will permit industry participants to monitor 
access to CMS's intra-state distribution system.
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    \3\ The Proposed Consent Order requires the listing of 
``Recorded Throughput,'' meaning the data obtained electronically by 
Consumers Energy from its Supervisory Control And Data Acquisition 
system units located at each of the interconnection points at issue.
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    The Proposed Consent Order, which will be effective for a period of 
ten years, requires Consumers Energy to incorporate these obligations 
into the tariffs it has filed with the Michigan Public Service 
Commission and into its contracts with shippers.

V. Opportunity for Public Comment

    The Proposed Consent Order has been placed on the public record for 
sixty (60) days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After sixty (60) days, the Commission will again review the Proposed 
Consent Order and the comments received and will decide whether it 
should withdraw from the Proposed Consent Order or make the order 
final.
    By accepting the Proposed Consent Order subject to final approval, 
the Commission anticipates that the competitive problems alleged in the 
complaint will be resolved. The purpose of this analysis is to invite 
public comment on the Proposed Consent Order to aid the Commission in 
its determination of whether to make final the Proposed Consent Order. 
This analysis is not intended to constitute an official interpretation 
of the Proposed Consent Order, nor is it intended to modify the terms 
of the Proposed Consent Order in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-7403 Filed 3-25-99; 8:45 am]
BILLING CODE 6750-01-M