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Warning that the pace of electric company mergers will accelerate in the coming years, the Federal Trade Commission July 21 urged a revision to the process used to evaluate these deals. The agency reiterated its view that existing antitrust laws are insufficient when it comes to evaluating electric company mergers because the deals involve companies that lawfully gained monopoly positions. “Current antitrust laws are not designed to address the mere possession of market power or the legitimate acquisition of or increase in market power through lawful regulatory processes,” the FTC said. “Instead, the antitrust laws are designed to address increases in market power brought about by mergers or unfair methods of competition.” The solution: complex computer modeling. “Tools to identify and remedy horizontal market power in [electric power] generation are critical to increased competition in electric power markets,” the agency said in its 50-page report, which was adopted unanimously by the five commissioners. Most electric utility mergers are reviewed by the Federal Energy Regulatory Commission, though the FTC has played a role is evaluating several deals. At hearings last year, several lawmakers proposed stripping merger authority out of FERC, though legislation to implement those threats has gone nowhere. The FTC said computer modeling would help FERC better understand what a merger would mean for the marketplace. The models could be adjusted to include broader or narrower market definitions and could be used to see what would happen to competition if independent producers of power moved into the market, the FTC said. FERC also should obtain planning documents from the merging companies, depose witnesses, review reports of consultants and interview customers, the FTC said in the report, which includes large excerpts from previous FTC recommendations made in 1998 and 1999. The FTC cautioned that vertical mergers between electric utilities and fuel companies also raise competitive concerns. A merged company could raise the price of fuel charged to competitors of its electric generating subsidiary. That would cause the electric generating companies to charge more for power. Those higher prices would be a windfall for the fuel company’s electric power unit, the agency said. The report is available at www.ftc.gov. Copyright �2000 TDD, LLC. All rights reserved.

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