UNITED STATES OF AMERICA
In the Matter of
CMS Energy Corporation, a corporation.
Docket No. C-3877
Pursuant to the provisions of the Federal Trade Commission Act and the Clayton Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission ("FTC" or "Commission"), having reason to believe that respondent CMS Energy Corporation ("CMS") , a corporation, and Duke Energy Company ("Duke"), a corporation, have entered into a stock purchase agreement whereby CMS proposes to acquire all voting securities of Panhandle Eastern Pipe Line Company ("Panhandle"), Panhandle Storage Company, and Trunkline LNG Company ("Trunkline"), now held by Duke, its subsidiaries or affiliates, that such agreement violates Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and that such agreement, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, stating its charges as follows:
1. Respondent CMS is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Michigan, with its office and principal place of business at 330 Town Center Drive, Dearborn, Michigan 48126.
2. Respondent CMS is a holding company for its principal subsidiary, Consumers Energy Company ("Consumers Energy"). Consumers is a combination electric and gas utility company that serves consumers in broad sections of Michigan. Consumers Energy generates, purchases, transmits and distributes electricity throughout Michigan. Consumers Energy purchases, transports, stores and distributes natural gas to Michigan consumers.
3. Respondent CMS is, and at all times relevant herein has been, engaged in interstate commerce, as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. § 12, and is a corporation whose business is in or affects commerce, as "commerce" is defined in Section 4 of the FTC Act, as amended, 15 U.S.C. § 44.
II. THE PROPOSED ACQUISITION
4. Respondent CMS entered into a Stock Purchase Agreement dated as of October 31, 1998, with Pan Energy Corp. and Texas Eastern Corp., subsidiaries of Duke, to acquire voting securities currently held by Duke for $1.9 billion plus the assumption of $300 million in debt.
III. TRADE AND COMMERCE
5. A relevant line of commerce in which to analyze the effects of the acquisition is the pipeline transportation of natural gas into Consumers Energy's natural gas service area (the "Service Area"). The Service Area includes all or portions of 54 counties in the lower peninsula of Michigan. Principal cites served include Bay City, Flint, Jackson, Kalamazoo, Lansing, Pontiac, and Saginaw.
6. Consumers Energy owns and operates an intra-state natural gas transmission system that delivers natural gas to residential, commercial and industrial customers in the Service Area. Consumers Energy is required by the Michigan Public Service Commission to transport gas for others on its transmission system.
7. Consumers Energy's intra-state natural gas transmission system is the only transmission system from which customers in the Service Area receive natural gas. Many customers within the Service Area can buy their own natural gas from suppliers, but need access to Consumers Energy's transmission system.
8. Natural gas consumed in the Service Area is transported to Consumers Energy's natural gas transmission system by pipelines owned by Duke (Trunkline and Panhandle), ANR Pipeline Co. ("ANR"), Great Lakes Transmission, L.P. ("Great Lakes"), Michigan Consolidated Gas Co. ("MichCon") and other companies. Each of these pipelines has one or more points of interconnection with Consumers Energy's transmission system.
9. The maximum rates that can be charged by Trunkline, Panhandle, ANR, Great Lakes, and MichCon to transport gas to interconnection points with Consumers Energy are established by the Federal Energy Regulatory Commission ("FERC") or the Michigan Public Service Commission ("MPSC"). Competition between these pipelines has resulted in actual prices for transportation significantly below the maximum established rates.
10. It is within Consumers Energy's discretion to establish an interconnection with another pipeline or to terminate, or reduce the capacity of, existing pipeline interconnections.
11. The cost for the pipeline transportation of gas into Consumers Energy's transmission system is a significant component in the cost of natural gas sold to customers in the Service Area.
12. Consumers Energy, as an electric utility, competes with self-generators of electricity in the Service Area who depend upon natural gas as a feedstock. An increase in the cost of gas transportation would increase the cost of self-generation of electricity.
IV. EFFECTS OF THE PROPOSED TRANSACTION
13. After the acquisition set forth in Paragraph Four, CMS would have an incentive to terminate, or reduce the capacity of, the interconnections with non-CMS pipelines. CMS would have such an incentive because the likely results of such action would be to increase volume and tariffs on Panhandle and Trunkline pipelines.
14. An anticompetitive effect of the acquisition set forth in Paragraph Four is to increase the likelihood that Panhandle and Trunkline will charge higher tariffs to shippers.
15. A second anticompetitive effect of the acquisition set forth in Paragraph Four is to increase the likelihood that natural gas prices will increase to customers in the Service Area.
16. A third anticompetitive effect of the acquisition set forth in Paragraph Four is to increase the likelihood that the price of electricity will increase for industrial customers located in the Service Area that can self-generate electricity.
17. It is unlikely that regulation by the Federal Energy Regulatory Commission or the Michigan Public Service Commission could prevent the likely anticompetitive effects of the acquisition.
V. STATUTES VIOLATED
18. The Stock Purchase Agreement described in Paragraph Four constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.
19. The acquisition described in Paragraph Four, if consummated, would constitute a violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.
IN WITNESS WHEREOF, the Federal Trade Commission, having caused this Complaint to be signed by the Secretary and its official seal affixed, at Washington, D.C., this second day of June, 1999, issues its Complaint against respondent.
By the Commission.
Donald S. Clark