May 23, 2011

Brattle Economists Submit Comments to the Federal Energy Regulatory Commission in Response to the Notice of Inquiry on Analysis of Horizontal Market Power Under the Federal Power Act

Brattle economists Romkaew Broehm, Peter Fox-Penner, Jim Reitzes, and Oliver Grawe recently submitted comments to the Federal Energy Regulatory Commission (FERC) on the Notice of Inquiry on Analysis of Horizontal Market Power Under the Federal Power Act (2011 M&A NOI). The comments, filed on May 23, 2011, discuss whether the Commission should revise its approach for examining horizontal market power concerns in transactions covered under Section 203 of the Federal Power Act (FPA) to reflect the 2010 Horizontal Merger Guidelines issued by the Department of Justice and the Federal Trade Commission (DOJ/FTC).

Drs. Broehm, Fox-Penner, Reitzes, and Grawe provide three main comments to the 2011 M&A NOI. First, the authors encourage the Commission not to limit its horizontal merger screen to the current prescribed Appendix A methodology, which focuses on measuring merger effects based on a post-merger market concentration and a change in market concentration statistics. Currently, the Commission only looks beyond the market concentration statistics when applicants fail the screen. Alternatively, the authors suggest that the Commission move away from the use of the Appendix A formula and adopt a principle-based approach that evaluates merger effects based on a theory of competitive harm without waiting for applicants to fail the initial FERC screen. This approach would also allow applicants to use a range of tools that best suit their competitive harm theory and strike a better balance between standardization regarding its test and the public interest.

Second, the authors caution that the Commission should not de-emphasize the importance of market definition. According to the authors, delineating markets is a necessary predicate to assessing a proposed merger’s effect on competition. Lastly, the authors believe that decision to adopt the 2010 DOJ/FTC Horizontal Merger Guidelines’ safe harbor thresholds must rely on whether the Commission will modify its overall approach of its merger review process. The authors warn the Commission against adopting these threshold levels without revising its current analytical framework.

To read the comments of Drs. Broehm, Fox-Penner, Reitzes, and Grawe, please follow the link below.

Associated Experts
Broehm 076
Principal
+1.617.864.7900
Dr. Broehm is an economic expert in the electric utility industry specializing in the areas of market competition, impacts of regulatory policies on wholesale power markets and power assets and valuation, and the evaluation of power procurement. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Reitzes 067
Principal
(Washington) +1.202.955.5050
(Toronto) +1.416.360.4849
Dr. Reitzes, a former Federal Trade Commission economist, specializes in antitrust and regulatory economics. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Fox penner 131
Academic Advisor
+1.202.955.5050
Dr. Fox-Penner specializes in economic, regulatory, and strategic issues in network industries. His practice centers on energy and environmental policies and electric regulation, planning, and competition issues. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4