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EPSA Cautions FERC Against Market Power in NU/NSTAR Merger

"The steady increase in buyer side market power and market concentration, however, along with the patently inadequate buyer market power mitigation measures, threatens the long-term viability of these markets in New England and elsewhere. Simply put, unless the Commission is as vigilant in policing the accumulation and exercise of buyer market power as it has been where seller market power is involved, competitive markets and the attendant benefits will be lost."

WASHINGTON, D.C. - The Electric Power Supply Association (EPSA) and
the New England Power Generators Association (NEPGA) today submitted a
protest to the Federal Energy Regulatory Commission (FERC) proposing
conditions to mitigate substantial buyer-side market power in the
proposed Northeast Utilities and NSTAR (NU/NSTAR) merger. EPSA and NEPGA
are particularly concerned with the potential incentive and ability of
the merged utility to exercise buyer market power. In addition, the
filing notes public statements from NU/NSTAR executives on plans to
begin constructing rate-based generation, a sharp departure from the
competitive market policies that have provided substantial benefits
while serving much of the region for over a decade. The filing asks that
the Commission condition approval of the proposed merger on market power
mitigation and additional monitoring.

EPSA and NEPGA's comments note, "The Commission's competition
policy stands at a crossroads. The Commission's long-standing policy
has been to foster the development of competitive wholesale power
markets, in particular, by encouraging the formation of ISOs and RTOs.
The organized, competitive markets administered by ISOs/RTOs have
consistently been found to produce significant benefits in terms of
increased reliability, transparency, and efficiency and reduced costs
and reliance on [out of market] mechanisms to maintain reliability such
as reliability must-run ("RMR") contracts. The steady increase in
buyer side market power and market concentration, however, along with
the patently inadequate buyer market power mitigation measures,
threatens the long-term viability of these markets in New England and
elsewhere. Simply put, unless the Commission is as vigilant in policing
the accumulation and exercise of buyer market power as it has been where
seller market power is involved, competitive markets and the attendant
benefits will be lost."

NU/NSTAR's petition for FERC approval of the merger acknowledges that
the combined utility would serve roughly 50 percent of New England's
electricity load. EPSA and NEPGA's filing contends that under FERC's
own merger approval guidelines this application clearly highlights
buyer-side market power as a relevant consideration where an analysis of
such a concern is appropriate and necessary. The filing goes on to say,
"[I]t should be self-evident that the combination of two of the
largest buyers in New England would substantially enhance their market
power and would likely have harmful effects on competition. Moreover,
the lack of detailed information on buyer-side market power and market
concentration underscores the need for Applicants to provide an analysis
of buyer market power performed in accordance with the Commission's
requirements to enable the Commission and other interested parties to
assess the competitive effects of the Merger."

CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.