PGW Files Testimony Opposing Exelon/PSEG Utilities Merger; Expert Witness Warns of Ability and Incentive to Artificially Inflate Prices.
The corrected release reads:
PGW FILES TESTIMONY OPPOSING EXELON/PSEG UTILITIES MERGER; EXPERT WITNESS WARNS OF ABILITY AND INCENTIVE TO ARTIFICIALLY INFLATE PRICES
Philadelphia Gas Works (PGW) filed written testimony today with the New Jersey Board of Public Utilities, joining scores of interveners opposing the pending merger between Exelon and Public Service Enterprise Group (PSEG), which would create the single largest and most powerful utility in the country. PGW's testimony, provided by Paul R. Carpenter, an expert witness who is known as one of the foremost authorities on the California energy crisis, raised serious concerns about the merger.
"The Board should be concerned with the impacts of the proposed Exelon/PSEG merger on wholesale electric and gas markets, including vertical issues - the merged entity's ability and incentive to raise prices in gas markets in order to benefit in the electricity market. An exercise of vertical market power would deny customers the benefits of retail competition in both gas and electricity markets. I believe that the merger will affect competition negatively and will harm the public interest by denying customers and competitive suppliers the benefits of competition(1)," said Carpenter.
"The proposed merger would put millions of people at serious risk for out-of-control electric and gas prices throughout the entire region," said Steven P. Hershey, vice president of community initiatives at PGW. "Because of the way the entire Pennsylvania, New Jersey, Maryland (PJM) energy grid works, the impact of this merger would extend far beyond New Jersey. Clearly, PGW customers and PGW itself are at risk as we face the serious danger that competitive markets designed to protect utility customers could be severely damaged."
In testimony filed today and in former testimony presented in writing to the Pennsylvania Public Utilities Commission, Carpenter supports his assessment of the merger's dangers with the following statements:
--"The incentive of the merged entity to raise the price of gas derives from its substantial baseload power generation capacity....Since natural gas fired generation is "on the margin" during 60 percent of the peak hours....an increase in the price of gas during those hours would directly translate into the market price of electricity to the benefit of the merged entity's baseload generation."(2)
--The danger of volatility in the gas market "is a lesson that was learned painfully during the summer of 2000 in California, when interruptible transportation failed to substitute for the firm capacity that was withheld from the market on the El Paso Natural Gas pipeline."(3)
Dozens of organizations, concerned citizen groups and antitrust experts are also raising serious concerns over the Exelon/PSEG merger. Diana Moss, a member of the American Antitrust Institute, wrote "any way you cut it, if Exelon/PSEG exercises its hefty market power, consumers in PJM are likely to suffer through higher electricity prices."(4) Labor unions also weighed in today with written testimony underscoring major concerns over the loss of jobs (see www.local601.org), while consumer groups including New Jersey Citizen Action and New Jersey PIRG protested the lack of competition (see www.fightthepowergrab.com.).
Paul R. Carpenter is principal and vice chairman of The Brattle Group, an economic and management consulting firm which specializes in the fields of industrial organization, finance and energy and regulatory economics. He has testified before federal and state regulatory commissions including the Federal Energy Regulatory Commission and the California Public Utilities Commission, in federal court, and before Congress, on issues of pricing, competition and regulatory issues. A full copy of his testimony to the New Jersey Board of Public Utilities can be found at: www.energymerger.org.
For more information on PGW's perspectives on the merger, contact Steven P. Hershey at 215-684-6668.
(1) PGW Statement, Docket No. EM05020106, page 12, lines 19-22 (2) PGW Statement, Docket No. EM05020106, page 5, lines 22-28 (3) PGW Statement, Docket No. EM05020106, page 40, lines 26-29 (4) Balance of Power, The Deal.com, Nov 4, 2005
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|Date:||Nov 14, 2005|
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