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Federal panel rewrites guidelines for mergers Reform addresses effects on consumers


WASHINGTON -- The Federal Energy Regulatory Commission adopted the most sweeping changes in 30 years in its guidelines on utility mergers yesterday, focusing on how such combinations would affect consumers' rates.

The changes were aimed at speeding approval of utility mergers, which under the old rules often faced long delays. The commission has decisions pending on nine proposed mergers with a value of about $25 billion, including one between Northern States Power and the Wisconsin Energy Corp. and the $3 billion Baltimore Gas and Electric Co.-Potomac Electric Power Co. alliance.

One commissioner, William Massey, said some utilities might be able to get their mergers approved in as little as five months, although the agency's overall objective is to make most decisions within 12 months to 15 months.

Under the new guidelines, utilities seeking commission approval of a merger are being asked to address the issue of whether the combination will give them too much control over a market. If it does, the utilities can propose ways to resolve such obstacles to competitiveness.

The commission also is asking utilities to demonstrate from the start how a merger would benefit consumers and to try to come up with agreements on rates with consumer groups before they file their applications. Donald Santa Jr., a commissioner, said a major factor in approving mergers would be their effect on rates.

"Here the focus is now clearly on the effect on rate payers," he said, as opposed to the "bean-counting that formerly occurred when the focus was on quantifying merger benefits."

Those old guidelines, which included whether the merger price was fair, often overshadowed a merger's impact on consumers and led to long delays in gaining commission approval.

Santa said the commission would also evaluate whether a merger would create a significant increase in market concentration and whether, by combining, utilities could evade effective regulation.

"We're feeling pretty positive," said Maripat Blankenheim, Wisconsin Energy spokeswoman. "We hope that it will open the way for quick consideration" of the merger with Northern States Power.

Steven Ross, a lawyer representing BGE and Pepco, said he expected that their proposed merger "will not raise any problems" in the criteria that the Federal Energy Regulatory Commission would focus on.

Under the new guidelines, the commission is essentially telling the utilities that if they want fast approval of their mergers, they must immediately address competitiveness issues and provide realistic solutions.

The commission outlined ways that utilities could deal with too great a concentration of market power.

They could, for example, spin off some of their generating capacity, build more transmission lines to allow competitors greater access or demonstrate that as the utility is deregulated, competitors could offset any attempt to artificially keep prices high.

Pub Date: 12/19/96

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