Media Release
| For Immediate Release | Contact | Phone |
| July 21, 2006 | Phyllis Salowe-Kaye | 973-220-3823 (office) |
| Ev Liebman | 856-966-3091, x. 13 (office) | |
| Atif Malik | 973-643-8800 (office) |
NJ's Regional Energy Monitor Releases Analysis Showing that the Department of Justice/Exelon-PSEG Consent Decree Fails to Correct Electricity Market Power Problems & Even Fails to Meet DOJ's own Anti-Trust Guidelines
Report Demonstrates the D.C. Consent Decree Fails to Mitigate the Market Power Impacts of the Proposed Merger and Should be Rejected by the New Jersey Board of Public Utilities. If Buy-out is Approved, NJ Ratepayers will be Stuck with Less Competition and Higher Rates
Statement of Phyllis Salowe-Kaye, NJCA Executive Director
Today, the Market Monitoring Unit (MMU) of the PJM* released it's analysis of the June 22, 2006 Consent Decree between the Exelon and PSEG Corporations and the Department of Justice (DOJ) concerning the proposed acquisition of PSEG by the Chicago based Exelon Corporation. As Citizen Action expected, the analysis reveals that the Consent Decree is woefully inadequate and fails to resolve the market power problems inherent in the takeover. Market Power is created when a company has such a significant percentage of the relevant market that it is able to raise prices above competitive levels. We now have even more evidence that if approved this buy-out will create a super-monopoly that could result in increased electricity costs of $2.3 billion a year for all of New Jersey's ratepayers.
Consumers cannot afford even one penny of unjustified energy costs simply to enhance the bank accounts of utility shareholders and top energy executives. The New Jersey BPU must put New Jersey and our ratepayers first and reject this merger.
At the time of its release New Jersey Citizen Action criticized the Consent Decree for its failure to adequately mitigate the serious market power created by the merger and the DOJ's failure to provide any documentation or analysis to support the Decree. The MMU analysis was requested by the staff of the New Jersey Board of Public Utilities, NJ's state regulatory agency that has the authority to reject or approve the proposed acquisition.
The MMU analysis looked at the energy competition impacts of the Decree on all of NJ's relevant electric markets and whether or not it meets the DOJ's own Merger Guidelines. These Guidelines outline the enforcement policy of the DOJ under federal anti-trust statutes and encompass the Department's policy that mergers should not be permitted to create or enhance or facilitate market power. The DOJ uses a measure of market concentration called "HHI" (the Herfindahl-Hirshman Index). Markets in which the HHI is between 1,000 and 1,800 are considered to be moderately concentrated and markets in which the HHI is in excess of 1,800 are considered to be highly concentrated. As outlined in the MMU report and under the DOJ's own standards, (which are weaker than New Jersey's), a merger in a moderately concentrated market is considered to potentially raise significant competitive concerns if it increases a market's HHI by 100 or more points. A merger in or resulting in a highly concentrated market is considered to potentially raise significant competitive concerns if it raises HHI levels 50 points or higher.
The MMU determined that under its analysis the DOJ/Exelon-PSEG divesture package fails in the vast majority of cases to meet the DOJ guidelines in our electricity markets, meaning that the proposed new company would have an unacceptable level of ownership of electric generating plants in those markets to a point that exceeds DOJ's own guidelines.
Now we know why the DOJ failed to provide any analytical support for its own consent decree – it doesn't even pass its own guidelines. This is just one more example of federal regulators being beholden to the interests of giant energy corporations at the expense of everyday working people and seniors.
A copy of the report is available at www.pjm.com/markets/market-monitor/reports.html.
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New Jersey Citizen Action is the state's largest citizen watchdog coalition, representing more than 60,000 family members and over 110 affiliated groups.
*PJM is New Jersey's Regional Transmission Organization. It plays a vital role in the country's electric system and manages a variety of electricity markets. In effect, the PJM ensures that our lights stay on and that New Jersey's and the region's electric system is reliable. The PJM's Market Monitoring Unit has played a key analytical role in the examination of the Exelon/PSEG proposal's impacts on the reliability of NJ and the region's electric system, its impact on those energy markets and specifically its effect on competition.
