[Federal Register Volume 64, Number 58 (Friday, March 26, 1999)]
[Notices]
[Pages 14725-14727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7403]
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FEDERAL TRADE COMMISSION
[File No. 9910046]
CMS Energy Corp.; Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint that accompanies the
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consent agreement and the terms of the consent order--embodied in the
consent agreement--that would settle these allegations.
DATES: Comments must be received on or before May 26, 1999.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 600 Pa. Ave., NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Frank Lipson or Mark Menna FTC/H-2105,
600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-2617 or
(202) 326-2722.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the
Commission's rules of practice (16 CFR 2.34), notice is hereby given
that the above-captioned consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for March 19, 1999), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public
Reference Room, Room H-130, 600 Pennsylvania Avenue, NW., Washington,
DC 20580, either in person or by calling (202) 326-3627. Public comment
is invited. Such comments or views will be considered by the Commission
and will be available for inspection and copying at its principal
office in accordance with Sec. 4.9(b)(6)(ii) of the Commission's rules
of practice (16 CFR 4.9(b)(6)(ii).
Analysis of Proposed Consent Order To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted from CMS
Energy Corporation (``CMS'' or ``Proposed Respondent'') an Agreement
Containing Consent Order (``Proposed Consent Order''). The Proposed
Consent Order remedies the likely anticompetitive effects in the market
for pipeline transportation of natural gas into parts of Michigan
arising from certain aspects of the proposed acquisition by CMS of all
voting securities of Panhandle Eastern Pipeline Company
(``Panhandle''), Panhandle Storage Company, and Trunkline LNG Company
(``Trunkline''), now held by Duke Energy Company (``Duke''), its
subsidiaries or affiliates.
II. Description of the Parties and the Transaction
CMS is a corporation organized, existing, and doing business under
and by virtue of the laws of the State of Michigan, with its office and
principal place of business at 330 Town Center Drive, Dearborn,
Michigan. CMS is a holding company for its principal subsidiary,
Consumers Energy Company (``Consumers Energy''). Consumers Energy is a
combination electric and gas utility company that serves customers in
broad sections of Michigan.
Duke is an integrated energy and energy services provider. Duke
delivers and manages electricity and natural gas throughout the United
States and abroad. Duke's Natural Gas Transmission segment is involved
in interstate transportation and storage of natural gas for customers
primarily in the Mid-Atlantic, New England and Midwest states. Duke's
earnings before interest and taxes for the three months ending
September 30, 1998, were $870.9 million.
Duke owns 100 percent of Panhandle Eastern Pipeline and Trunkline
Pipeline, both of which are natural gas pipelines regulated by the
Federal Energy Regulatory Commission (``FERC'') Panhandle originates in
the producing fields of Oklahoma and moves natural gas in a
northeasterly direction from Oklahoma into Michigan. Trunkline
originates in the Gulf Coast and transports gas produced from offshore
Gulf Coast wells north to the Midwest. Trunkline terminates at the
Michigan border. Both Panhandle and Trunkline interconnect with
Consumers Energy.
Respondent CMS entered into a Stock Purchase Agreement dated as of
October 31, 1998, with PanEnergy Corp. and Texas Eastern Corp.,
subsidiaries of Duke, to acquire all voting securities of Panhandle
Eastern Pipe Line Company, Panhandle Storage Company, and Trunkline LNG
Company for $1.9 billion plus the assumption of $300 million in debt.
III. The Proposed Complaint and Consent Order
The Commission has entered into an agreement containing a Proposed
Consent Order with CMS in settlement of a proposed complaint alleging
that the proposed acquisition violates section 5 of the Federal Trade
Commission Act, 15 U.S.C. 45, and that consummation of the acquisition
would violate section 7 of the Clayton Act, 15 U.S.C. 18, and section 5
of the Federal Trade Commission act. The proposed complaint alleges
that the acquisition will lessen competition in the pipeline
transportation of natural gas into Consumer Energy's gas service area
(the ``Service Area''). The Service Area includes all or portions of 54
counties in the lower peninsula of Michigan. Principal cities served
include Bay City, Flint, Jackson, Kalamazoo, Lansing, Pontiac, and
Saginaw.
Consumers Energy receives natural gas through interconnections with
Panhandle and Trunkline as well as other pipelines in which Consumers
Energy will have no financial interest after the proposed acquisition.
The proposed compliant alleges that Consumers Energy can unilaterally
decide to reduce the interconnection capacity or close the
interconnection altogether. The proposed complaint alleges that after
the acquisition, CMS will have an incentive to close or reduce the
interconnection capacity with the non-CMS pipelines. This action is
likely to increase demand for transportation service on Panhandle and
Trunkline and enable these pipelines to increase their rates. The
proposed compliant also alleges that such a rate increase may also
affect customers' natural gas prices and electricity prices in the
Service Area.
To remedy the alleged anticompetitive effects of the proposed
acquisition, the Proposed Consent Order allows a shipper to use another
interconnection on the Consumers Energy system if the shipper does not
incur increased costs. Alternatively, the Proposed Consent Order
requires CMS to supply gas from its own system to any shipper to which
CMS refuses transportation because of reduced interconnect capacity.
The shipper would have to return the borrowed gas, but not earlier than
the end of the calendar month following the month in which CMS reduced
interconnect capacity.
IV. Resolution of Antitrust Concerns
Consumers Energy, a CMS subsidiary, is the franchised monopoly
provider of local gas distribution services to residential, commercial
and industrial customers in large parts of Michigan. Gas enters the
Consumers Energy's intra-state transmission system at interconnections
with Trunkline, Panhandle and other pipelines (mainly, those owned by
ANR, Great Lakes and Michigan Consolidated Gas). While Consumers Energy
is the local distribution monopolist, it must offer transportation to
other firms on its transmission system. In this manner, it competes
with other companies in the
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sale of natural gas to customers on the Consumers Energy system.
Consumers Energy controls the operation of its system, including
its capacity to receive gas at pipeline interconnections. Currently,
Consumers Energy, as a purchaser of interstate transportation services,
has the incentive to maintain competitive access to its intra-state
system to maintain maximum flexibility and minimum prices for the gas
delivery. In fact, prices on both Panhandle and Trunkline are
substantially below the maximum permitted by FERC. After the
acquisition, however, CMS would have the incentive to restrict access
to the Consumers Energy system by non-CMS pipelines to support higher
post-acquisition transportation prices on Trunkline and Panhandle. CMS
could restrict the access non-CMS pipelines have to the Consumers
Energy system by reducing the capacity of the interconnections that
service those pipelines. It is unlikely that either State or Federal
regulatory agencies have the authority to interdict this behavior.
The resulting increase in the price of natural gas transportation
into the Consumers Energy system would likely increase the price of gas
sold to customers in the Service Area. In addition, the proposed
acquisition is likely to adversely affect industrial plants locate in
the Service Area that rely on natural gas as a feedstock to generate
their electricity. Increased gas transportation rates are likely to
increase the cost of self-generation and may force these plants,
instead, to purchase electric power from Consumer Energy.
The Proposed Consent Order is designed to prevent CMS from
restricting or eliminating the interconnection capacity available to
competing pipelines. The Proposed Consent Order identifies a designated
capacity for each interconnection based on historical usage to maintain
non-CMS capacity at current levels. CMS may adjust the designated
capacity for reasons related to force majeure or routine maintenance,
resulting in an adjusted designated capacity for each
interconnection.\1\
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\1\ The Proposed Consent Order refers to these measures as
``Designated Capacity'' and ``Adjusted Designated Capacity.'' The
Proposed Consent Order refers to actual capacity as ``Available
Interconnection Capacity,'' meaning the amount of natural gas that
Consumers Energy is ready, willing and able to receive at a non-CMS
interconnection. Exhibit A to the Proposed Consent Order lists the
eight non-CMS interconnection points at issue, along with the
Designated Capacity of each interconnection.
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The Proposed Consent Order requires CMS to give shippers two
options if they cannot deliver gas into Consumers Energy's service area
because the available interconnection capacity is less than actual
capacity for any reasons other than force majeure or routine
maintenance. First, if the shipper is able to nominate its shipments to
another pipeline interconnection point into the Consumers Energy system
at no additional cost to the shipper, CMS will accept the gas at such
other pipeline interconnection point. Second, if the shipper would
incur additional cost in delivering at another interconnection point,
or if no other interconnection point is available to the shipper, CMS
will provide gas from its own supply of gas and without interruption on
the Consumer Energy system for the shipper's account equal to the
volume of gas nominated by the shipper that could not be transferred
through any of the interconnection points. The shipper must return the
gas to Consumers Energy without penalty by the end of the month
following the month in which CMS provided gas in offset to the
shipper's blocked gas.\2\
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\2\ The procedure is iterative in that the process repeats
itself if Consumers Energy declines a shipper's return of gas
because actual non-CMS interconnection capacity is less than current
capacity, thereby giving the shipper additional time to settle the
offset with Consumers Energy.
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The Proposed Consent Order requires CMS to post to an electronic
bulletin board information which will let shippers know whether actual
capacity is less than current capacity at non-CMS interconnects.
Specifically, the Proposed Consent Order requires Consumers Energy to
provide (for each interconnection point) the current capacity, current
capacity as adjusted for maintenance and force majeure conditions
(including the cause of the adjustment and the date it is expected to
end), actual capacity, shipments nominated and confirmed (no later than
the second business day of each month), and throughput for the previous
month.\3\ This information will permit industry participants to monitor
access to CMS's intra-state distribution system.
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\3\ The Proposed Consent Order requires the listing of
``Recorded Throughput,'' meaning the data obtained electronically by
Consumers Energy from its Supervisory Control And Data Acquisition
system units located at each of the interconnection points at issue.
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The Proposed Consent Order, which will be effective for a period of
ten years, requires Consumers Energy to incorporate these obligations
into the tariffs it has filed with the Michigan Public Service
Commission and into its contracts with shippers.
V. Opportunity for Public Comment
The Proposed Consent Order has been placed on the public record for
sixty (60) days for receipt of comments by interested persons. Comments
received during this period will become part of the public record.
After sixty (60) days, the Commission will again review the Proposed
Consent Order and the comments received and will decide whether it
should withdraw from the Proposed Consent Order or make the order
final.
By accepting the Proposed Consent Order subject to final approval,
the Commission anticipates that the competitive problems alleged in the
complaint will be resolved. The purpose of this analysis is to invite
public comment on the Proposed Consent Order to aid the Commission in
its determination of whether to make final the Proposed Consent Order.
This analysis is not intended to constitute an official interpretation
of the Proposed Consent Order, nor is it intended to modify the terms
of the Proposed Consent Order in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-7403 Filed 3-25-99; 8:45 am]
BILLING CODE 6750-01-M