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Federal Energy Regulatory Commission Chairman Joseph Kelliher believes his agency is up to the task of new utility merger review duties heaped on by the passage of the Energy Policy Act of 2005, which repealed major restrictions on industry acquisitions. “I do not see a strain at all on us. People speculate over what will be the volume and number of mergers and asset sales and how it might change in the wake of repeal,” Kelliher said Tuesday at a media briefing sponsored by Energy Daily. “There are a number of theories, and we’ll see how they’re borne out over time.” The energy bill, which repealed the Public Utility Holding Company Act of 1935, or PUHCA, requires FERC to have merger review rules in place by Feb. 6, 2006. Kelliher said the commission is on track to do just that. “I don’t like missing deadlines,” he said. Kelliher noted that while the commission needs to complete 15 major rulemakings in the next 180 days, FERC is also prepared to help hurricane-ravaged utilities recover costs to repair their power systems, a move that could set a precedent. “We’ll be open to requests at the federal level to consider cost recovery in the wake of Hurricane Katrina,” Kelliher said. The commission regulates the interstate transmission of electricity and wholesale sales of electricity in interstate commerce. Kelliher said that neither Southern Co. nor Entergy Corp., the two utilities with electric systems hit hardest by the hurricane, have indicated they will seek federal aid. “But I don’t want to rule out the possibility that we might get a request at FERC to help in cost recovery,” Kelliher said. Traditionally, state regulators have dealt with utilities’ costs to fix storm-damaged transmission lines. Florida, which was battered by four hurricanes in 2004, used state proceedings to recoup their repair costs. “We will consider them if they are structured in a way where it would be jurisdictional to the commission,” Kelliher said. “All I’m doing is leaving the door open,” he said. The timing of the new regulations is critical because some industry experts expect a wave of mergers and acquisitions in the utility sector as restrictions put on holding companies by PUHCA fall away. PUHCA’s merger restrictions were eliminated by this year’s energy bill, but FERC was handed more oversight of utility mergers to ensure that deals don’t harm the public. FERC’s reviews will be in addition to reviews also conducted by U.S. antitrust agencies. For years, the power utility industry has been lobbying to kill the measure, saying the law is a Depression-era anachronism that has hindered much-needed investment in the ailing electricity grid. Now, the law’s demise removes a major impediment to investment in the sector, allowing nonutility businesses — from private equity funds to large manufacturing companies to investment banks — to acquire a utility. Some industry experts contend that the likely impact of PUHCA repeal is overblown and that utility deals presenting good business opportunities would happen with or without the law’s demise. Nevertheless, consumer advocates, who protested loudly against PUHCA’s repeal, say FERC must work fast to get all the rulemaking done in time. In addition, the agency must become more diligent in questioning industry mergers. In the past decade — albeit with less expansive review authority — it didn’t object to a single deal. For example, FERC declined states’ attorneys general recent request for a hearing to examine claims that the mega-merger between Newark, N.J.-based Public Service Enterprise Group Inc. and Chicago’s Exelon Corp. would hurt consumers. FERC approved the merger in July without a hearing. Now constituents are asking for a rehearing. Kelliher noted that the request is “pending.” Copyright �2005 TDD, LLC. All rights reserved.

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