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Enron Mail |
Antitrust Division Won't Challenge
Electricity Distribution Cooperative WASHINGTON (BNA) -- A proposal by 17 rural Arkansas electric power distribution cooperatives that would allow them to market electric power to retail customers passes antitrust muster, according to a Jan. 10 business review letter by the Justice Department's Antitrust Division, which could find no lessening of competition in any electric power market. The distribution cooperatives are 17 nonprofit cooperative corporations formed under the Electric Cooperative Corporation Act of Arkansas to provide electric service predominantly to rural consumers. Each distribution cooperative is owned by the individual member/consumers that it serves and is legally obligated to distribute annually all its income to its member/customers. Due to the 1999 enactment of the Electric Consumer Choice Act, which mandates competition in the retail sale of electricity beginning as early as Jan. 1, 2002, the manner of selling and buying retail electricity within Arkansas will change greatly. Consumers now purchase electricity only from the regulated electric utility serving the territory in which the consumer is located. Under the Act, a consumer will be allowed to purchase electric energy from any entity in the competitive marketplace, and the consumer's incumbent utility will have to deliver that electricity to the consumer's door under regulated distribution charges. The new legislation's primary focus is the separation of the retail marketing activities--which will be completely competitive--from the electric utility's regulated transmission and distribution activities. To ensure that the utility's marketing operations do not benefit improperly from its relationship with the utility, the Act provides that employees engaged in the transmission and distribution system operations are required to function independently of employees engaged in the marketing or sale of electricity at retail. The act creates an obligation for each incumbent utility to offer a standard service package to any consumer who has not been willing or able to secure an alternative energy service provider. Distribution cooperatives, under the act, may serve these consumers, referred to as default consumers, directly or they may assign them to an affiliate. The rates for the standard service package will be a market rate, unless the incumbent utility chooses to offer a regulated rate approved by the Arkansas Public Service Commission. The proposal advanced by the distribution cooperatives would enable them to create a joint venture to market electric power to retail customers throughout Arkansas. All retail marketing activities outside the traditional local territories of the distribution cooperatives would be conducted through the joint marketing venture. If a distribution cooperative decides to withdraw from the joint venture, it may compete with the joint venture for any and all consumers. The proposal provides that each distribution cooperative would decide individually whether to serve its default customers directly or to assign its default customers to the joint venture. Each distribution cooperative has a relatively small amount of the electric power generating capacity in Arkansas, and the combined generating power capacity of the 17 distribution cooperatives is approximately 6 percent of the total generating capacity in the two areas of Arkansas in which the joint venture is likely to market. The joint venture is expected to achieve economies of scale that would give it significantly lower distribution costs in statewide or regional markets than would be attainable by individual members. Procompetitive Effects In the business review letter, Acting Assistant Attorney General A. Douglas Melamed indicated that the proposed joint retail marketing venture does not appear to have any anticompetitive effect. He commented that "while the distribution cooperatives could be viewed as potential entrants into each other's local retail markets, regional markets and a state-wide market, their small size and relatively high operating costs make it unlikely that they could enter new markets on their own or that, if they tried to enter, they would offer effective competition." Melamed added that "the existence of other, larger potential entrants into [the local retail markets] would significantly diminish, if not eliminate, any anticompetitive effect that might otherwise result from the joint venture proposal. It seems at least as likely, if not more so, that the joint retail marketing proposal would have the procompetitive effect of creating an additional entrant into retail markets not currently served by the distribution cooperatives." The business review letter is available at http://www.usdoj.gov/atr/--the Antitrust Division's Web site-- and a file containing the business review request and the division's response may be examined in the Antitrust Documents Group of the Antitrust Division, Suite 215, Liberty Place, 325 7th St., N.W., Department of Justice, Washington, DC 20004.
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