Antitrust Law Daily Wrap Up, ANTITRUST NEWS—Justice Department Closes Investigation into Entergy Power Plant Acquisitions, Continues to Look into Exclusionary Conduct Allegations , (Nov 15, 2012)

By E. Darius Sturmer, J.D.

The Department of Justice Antitrust Division announced on November 14 that it will not challenge Entergy Corporation’s acquisition of power generating facilities in Mississippi and Arkansas from KGen Power Corporation. At the same time, however, the agency clarified that it will continue to investigate allegations that Entergy has engaged in exclusionary conduct in its four-state utility service area spanning parts of Arkansas, Louisiana, Mississippi and Texas. The conduct investigation has focused on whether certain of Entergy’s power generation dispatch, transmission planning, and power procurement practices constitute exclusionary conduct under Section 2 of the Sherman Act.

According to the Antitrust Division, Entergy’s acquisitions of KGen’s power plants in Jackson, Mississippi, and Hot Spring County, Arkansas, are unlikely to substantially lessen competition in light of forthcoming changes in Entergy’s service area. Since the government’s investigation commenced, Entergy has divulged that it intends to join a regional transmission organization (RTO) and to divest its transmission system. “If Entergy follows through on its transmission system commitments, the Antitrust Division’s concerns will be resolved,” the government stated.

Regarding the conduct investigation, the Antitrust Division stated that it has been exploring whether Entergy has harmed consumers by exercising its control over its transmission system and dominant fleet of gas-fired power plants to exclude rival operators of low-cost combined-cycle gas turbine (CCGT) power plants from competing to sell long-term power. Specifically, the government has been evaluating whether Entergy’s practices have effectively foreclosed these more efficient rivals from obtaining long-term firm transmission service, a necessary input for selling long-term power products to wholesale customers in the Entergy service area. As part of the conduct investigation, the Antitrust Division has also been reviewing the competitive impact of, and circumstances surrounding, Entergy’s serial acquisition of rivals’ CCGT power plants, including the two KGen plants.

The company’s professed efficiency and regulatory justifications for its conduct “have not been persuasive,” the agency remarked.

However, Entergy’s stated intention to join the Midwest Independent Transmission System Operator (MISO) RTO and its entry into an agreement to divest its electric transmission business to ITC Holdings Corp. (ITC), an independent transmission company, could reverse that conclusion. Entergy has initiated the state and federal regulatory processes in support of these significant structural changes, secured conditional MISO approval from several state regulators, and committed its utilities to a target MISO integration date of December 2013.

“If Entergy follows through on its commitments, these measures will address the Antitrust Division’s concerns by eliminating Entergy’s ability to maintain barriers to wholesale power markets, ensuring that all Entergy service area generation is dispatched independently and at lowest cost, increasing market transparency and oversight, and properly aligning incentives for the construction of transmission,” the Antitrust Division said. “Such measures would directly benefit consumers, who will ultimately enjoy lower electricity prices and improved reliability as a result of RTO integration and the transmission system divestiture.”

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