Flawed reasoning

Journal Article · Thu Jul 15 04:00:00 EDT 1993 · Public Utilities Fortnightly; (United States)

OSTI ID:6218479

Frankena, M W; Owen, B M

The FERC's failure to investigate the Entergy/GSU merger's effects on market power may force other agencies to examine electric utility mergers on their own. The competitive effects of the proposed merger Entergy and Gulf States Utilities (GSU) will not be further investigated by the Federal Energy Regulatory Commission (FERC), according to a January 1993 order. The FERC's primary justification is that the [open quotes]open access[close quotes] transmission conditions offered by the merging parties eliminated concern over market power in transmission and bulk power. The FERC's reasoning is flawed. If the merger were to lead to an increase in market power, the proposed transmission conditions would not prevent the merged firm from exercising that power. The FERC also justifies its decision not to investigate the competitive effects of the merger on the grounds that no intervenor had demonstrated that present competition between the two systems is more than de minimis. This is not an appropriate standard. Intervenors demonstrated that Entergy's and GSU's transmission system offer alternative contract routes for bulk power between generators and customers. Even if Entergy and GSU both do not actually sell significant amounts of the same transmission-service, an antitrust evaluation should consider whether the availability of a second, independent route constrains the pricing of the first. The FERC's reasoning indicates that it has lost its way in carrying out its responsibilities to protect consumers. Open access to transmission systems may play an important role in increasing competition in bulk power markets. However, the FERC's goal should be to promote competition, not merely to open access for its own sake. In its enthusiasm to secure [open quotes]open access[close quotes], the FERC appears willing to ignore possible reductions in competition.

• OSTI ID: 6218479
• Journal Information: Public Utilities Fortnightly; (United States), Journal Name: Public Utilities Fortnightly; (United States) Vol. 131:14; ISSN PUFNAV; ISSN 0033-3808
• Country of Publication: United States
• Language: English

Related Subjects

24 POWER TRANSMISSION AND DISTRIBUTION
240600 -- Power Transmission & Distribution-- Legislation & Regulations-- (1990-)
29 ENERGY PLANNING, POLICY, AND ECONOMY
296000* -- Energy Planning & Policy-- Electric Power
ANTITRUST LAWS
COMPETITION
ELECTRIC POWER
LAWS
LEGAL ASPECTS
MARKET
NATIONAL ORGANIZATIONS
POWER
POWER TRANSMISSION
REGULATIONS
US DOE
US FERC
US ORGANIZATIONS