Docket No. RM96-6-000 25 analytical tool in all cases. It is conservative enough so that parties and the Commission can be confident that an application that clears the screen would have no adverse effect on competition. The screen also will be valuable in identifying potential competitive problems early in the process. The result will be more narrowly focused issues at hearings when they are necessary. We also note that the screen is intended to be somewhat flexible. It sets out a general method, but we will consider other methods and factors where applicants properly support them. We believe that the analytic screen will produce a reliable, conservative analysis of the competitive effects of proposed mergers. However, it is not infallible. In some cases, the screen may not detect certain market power problems. There also may be disputes over the data used by applicants or over the way applicants have conducted the screen analysis. These claims may be raised through interventions and by the Commission staff. However, such claims must be substantial and specific. In other words, they should focus on errors in or other factual challenges to the data or assumptions used in the analysis, or whether the analysis has overlooked certain effects of the merger. Unsupported, general claims of harm are insufficient grounds to warrant further investigation of an otherwise comprehensive analysis developed by the applicants. Intervenors may also file an alternative competitive analysis, accompanied by appropriate data, to support their arguments. The Commission realizes that Docket No. RM96-6-000 - 26 the need for more rigor in intervention showings could require additional efforts by potential intervenors. We will therefore routinely allow 60 days from filing for intervenors and others to comment on a merger filing. 32/ A detailed illustrative description of the analytic screen that we will use is in Appendix A. The following is a brief summary of the screen. There are four steps the applicant must complete and the Commission will follow: (1) Identify the relevant products. Relevant products are those electricity products or substitutes for such products sold by the merging entities. (2) Geographic markets: identify customers who may be include, at a minimum, all entities directly interconnected to a merging party and those that historical transaction data indicate have traded with a merging party. (3) Geographic markets: identify potential suppliers that can compete to serve a given market or customer. Suppliers must be able to reach the market both physically and economically. There are two parts to this analysis. One is determining the economic capability of a supplier to reach a market. This is 32/ Merger applicants that wish to facilitate the merger review process should serve potential intervenors with copies of their filing (via overnight delivery), including electronic versions, when they file their applications with the Commission. Cf. Open Access Rule, 61 FR 21,618 n.510. Docket No. RM96-6-000 27 accomplished by a delivered price test, which accounts for the supplier's relative generation costs and the price of transmission service to the customer, including ancillary services and losses. The second part evaluates the physical capability of a supplier to reach the customer, that is, the amount of electric energy a supplier can deliver to a market based on The usefulness of the screen analysis depends critically on the data that are supplied with the application. These data are described in Appendix A. Applicants should file in electronic format the data specified as well as any other data used in their analysis. If the Guidelines' thresholds are not exceeded, no further 331 The Guidelines address three ranges of market concentration: merger Herfindahl-Hirschman Index (HHI) is below 1000, - if the post merger HHI ranges from 1000 to 1800 and the change in HHI is greater than 100, the merger potentially raises significant competitive concerns; and (3) a highly concentrated postmerger market - if the post-merger HHI exceeds 1800 and the change in the HHI exceeds 50, the merger potentially raises significant competitive concerns; if the change in HHI exceeds 100, it is presumed that the merger is likely to create or enhance market power. if an adequately supported screen analysis shows that the merger would not significantly increase concentration, and there are no interventions raising genuine issues of material fact that cannot be resolved on the basis of the written record, the Commission will not set this issue for hearing. If the thresholds are exceeded, then the application should present further analysis consistent with the Guidelines. The Commission will also consider any applicant-proposed remedies at this stage. If none is presented, or if the analysis does not adequately deal with the issues, we will need to examine the merger further. The Commission will set for hearing the competitive effects of merger proposals if they fail the above screen analysis, if there are problems concerning the assumptions or data used in the screen analysis, or if there are factors external to the screen which put the screen analysis in doubt. We may also set for hearing applications that have used an alternative analytic method the results of which are not adequately supported. As discussed in Section III F, the Commission will attempt to summarily address issues where possible and may use procedural mechanisms that permit us to dispose of issues without having a trial-type hearing. e. Mitigation Although a competitive analysis pursuant to the Guidelines may show that a proposed merger would have anticompetitive effects, the Commission may be able to approve the merger as consistent with the public interest if appropriate mitigation measures can be formulated. In the past, in some cases the Commission has conditionally approved a merger if applicants agreed to conditions necessary to mitigate anticompetitive effects. In some instances, applicants themselves have voluntarily offered commitments to address various concerns. 34/ Commenters suggested a variety of conditions that we could impose (or remedies that applicants could adopt voluntarily) to solve competitive problems with a merger. These include, for example, the formation of an Independent System Operator (ISO), divestiture of assets, elimination of transmission constraints, efficient regional transmission pricing, and offering an open season to allow the merging utilities' customers to escape from their contracts. Other commenters oppose some or all of these remedies. Some commenters also argue that we should monitor the situation after a merger and impose any new remedies that are needed; other commenters oppose such post-merger review. 35/ As noted, the Commission's review of merger applications has frequently resulted in the development of particular conditions 34/ E.g., Northeast Utilities Services Company/Re Public 351 The comments on remedies are summarized in more detail |