Gas and power convergence requires uniform conduct rules, FTC says

By the OGJ Online Staff

HOUSTON, Dec. 27 -- US Federal Trade Commission said uniform codes of conduct are needed for electricity affiliates of gas utilities and gas affiliates of electricity utilities because of "substantial" convergence between the two industries.

The FTC filed comments last week in support of the Federal Energy Regulatory Commission's proposed new uniform standards of conduct for natural gas pipelines and electric utilities.

FTC said in its filing that FERC is justified in broadening and unifying the coverage of its affiliate standards of conduct. FTC found in four separate merger investigations that gas and power convergence means more competitive opportunities among gas and electricity suppliers but also more opportunities for uncompetitive behavior.

In a recent call for comments for a new rule, FERC said that the tendency for transmission owning utilities to favor their own generation to serve electricity load be "reined in." One way to do that is to keep utility employees that arrange for generation supply from having preferential access to transmission information. Currently, open access rules for electricity transmission do not apply if the utility is providing transmission and generation for its own customers. This means that the transmission owner may favor its generation over non-affiliated generators limiting competition.

To stop this so-called native load preference, FTC agrees with FERC that regional transmission organizations (RTOs) should be independent of transmission owners that also control generation in the same area.

"Once RTOs are operational and are using market mechanisms to manage transmission congestion and ensure efficient transmission pricing, there will be no need for a native load preference," FTC said.

While uniform codes of conduct are necessary, properly structured independent RTOs will be most effective way to control anticompetitive behavior, FTC said.

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