[Federal Register Volume 64, Number 218 (Friday, November 12, 1999)]
[Notices]
[Pages 61645-61647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29569]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 991 0244]


Dominion Resources, Inc., et al.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

-----------------------------------------------------------------------

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 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 December 7, 1999.

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

FOR FURTHER INFORMATION CONTACT: Richard Parker or Norman Armstrong, 
FTC/H-374, 600 Pennsylvania. Ave., NW, Washington, D.C. 20580. (202) 
326-2574 or 326-2682.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's

[[Page 61646]]

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 
thirty (30) 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 November 
5, 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, 
D.C. 20580, either in person or by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Ave., NW, 
Washington, D.C. 20580. Two paper copies of each comment should be 
filed, and should be accompanied, if possible, by a 3\1/2\ inch 
diskette containing an electronic copy of the comment. 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 
Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Analysis of Agreement Containing Consent Orders To Aid Public 
Comment

    The Federal Trade Commission (``Commission'') has accepted subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Dominion Resources, Inc. (``Dominion'') and 
Consolidated Natural Gas Company (``CNG''), which is designed to remedy 
the anticompetitive effects resulting from Dominion's acquisition of 
CNG. Under the terms of the agreement, Dominion will be required to 
divest Virginia Natural Gas, Inc. (``VNG''), a subsidiary of CNG, which 
provides local gas distribution service within the Commonwealth of 
Virginia, within the time period set forth in the Stipulation entered 
into between the staff of the State Corporation Commission of the 
Commonwealth of Virginia, Dominion, and CNG in State Corporation Case 
No. PUA990020.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement and the comments received, and will decide 
whether it should withdraw from the proposed Consent Agreement or make 
final the Decision & Order.
    Pursuant to an Agreement and Plan of Merger dated March 31, 1999, 
amended May 11, 1999, Dominion agreed to acquire 100 percent of the 
issued and outstanding voting securities of CNG for $5.3 billion. The 
Commission's Complaint alleges that the acquisition, if consummated, 
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 
Sec. 18, and Section 5 of the Federal Trade Commission Act, as amended, 
15 U.S.C. Sec. 45, in the market for the generation of electric power 
in southeastern Virginia.
    Dominion, through its subsidiary Virginia Power, accounts for more 
than 70 percent of the electric power generation capacity in the 
Commonwealth of Virginia. CNG, through its VNG subsidiary, is the 
primary distributor of natural gas in southeastern Virginia. Natural 
gas is one of a limited number of fuels that are used in the operation 
of an electric generating facility that supplies electric power to 
residential and commercial customers. The generation of electric power 
in the Commonwealth of Virginia is regulated by the Virginia State 
Corporation Commission and the Federal Energy Regulatory Commission. 
Deregulation of the electric power generation business in Virginia is 
slated to begin on January 1, 2002.
    The market for the generation of electric power is highly 
concentrated, and the proposed acquisition would combine the dominant 
provider of electric power in the Commonwealth of Virginia with the 
primary distributor of natural gas in southeastern Virginia. With the 
acquisition of CNG by Dominion, entry into the electric power 
generation market in southeastern Virginia by companies unaffiliated 
with Dominion may be deterred because of Dominion's control over VNG. 
Dominion's control over VNG would likely deter or disadvantage new 
entry into the electric power generation market because Dominion may be 
able to raise the costs of entry and production to new entrants. The 
proposed acquisition would therefore allow Dominion to exercise market 
power unilaterally in southeastern Virginia, increasing the likelihood 
that purchasers of electric services would be forced to pay higher 
prices.
    Substantial barriers to new entry exist in the market for the 
generation of electric power. Entry into the electric power generation 
market in southeastern Virginia by construction of plants that use 
fuels other than natural gas is unlikely to occur due to environmental 
restrictions. Natural gas is increasingly the fuel of choice for new 
electric generation plant construction. With Dominion's acquisition of 
CNG and its subsidiary VNG, Dominion may be able to deter new entry by 
raising the costs of entry and production. The market for the delivery 
of natural gas in southeastern Virginia is also characterized by high 
barriers to entry. It would be costly and time consuming for other 
natural gas transportation companies to extend pipelines from their 
existing network to southeastern Virginia. Moreover, other pipelines 
near the relevant area lack sufficient excess capacity to support a new 
pipeline into the area, and VNG has substantial excess capacity. 
Because of the difficulty of entry into the natural gas distribution 
market in southeastern Virginia, new entry is unlikely to deter or 
counteract the anticompetitive effects of the transaction.
    The Consent Agreement effectively remedies the acquisition's 
anticompetitive effects in the market for the generation of electric 
power by requiring Dominion to divest VNG pursuant to the terms of the 
Stipulation entered into by Dominion and the staff of the State 
Corporation Commission of the Commonwealth of Virginia in State 
Corporation Case No. PUA990020. Under the Stipulation, Dominion has one 
year to divest VNG to a third party, and if it is unable to find a 
suitable purchaser, Dominion must spin off VNG to its shareholders. The 
Federal Trade Commission's Consent Agreement requires Dominion to 
comply with the terms of the Stipulation, and further prohibits any 
Dominion shareholder from receiving more than 5 percent of the voting 
shares of VNG. In order to ensure that VNG remains a viable, 
independent competitor pending its divestiture, the Federal Trade 
Commission has issued on Order to Hold Separate. Under the Order to 
Hold Separate, Dominion and CNG shall continue to provide services to 
VNG that CNG is currently being provided until VNG is divested. The 
Order to Hold Separate further provides that the Federal Trade 
Commission may appoint an independent auditor to monitor Dominion's and 
CNG's compliance with their obligations to hold VNG separate and 
independent.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the Consent Agreement or to modify its terms 
in any way.


[[Page 61647]]


    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-29569 Filed 11-10-99; 8:45 am]
BILLING CODE 6750-01-M