Commission authorization to file comments with Georgia Public Service Commission: The Commission has authorized the staff of the Bureau of Economics and the Office of General Counsel to file comments with the Georgia Public Service Commission (GPSC) regarding proposed standards to determine whether market forces constrain retail prices for natural gas. The GPSC's proposals respond to the Georgia Legislature's enactment of the Natural Gas Consumers' Relief Act (the Act) that establishes a rebuttable presumption that retail market conditions are not competitive - and thus that retail prices are significantly higher than they would be if they were constrained by market forces - if more than 90 percent of consumers are served by three or fewer marketers. The comments, which were filed in response to a Notice of Proposed Rulemaking, are available as a link to this press release on the Commission's Web site.
The GPSC proposes intervening "as narrowly as possible" to limit retail natural gas price increases if it finds that prices paid by a specific retail customer delivery group are "not constrained by market forces" and that prices are "significantly higher" than they would be if not constrained by such forces. According to the FTC staff comments, any such intervention should be "narrow and short-lived," with a sunset review of any standards enacted once the transition from a regulated to deregulated environment has taken place.
The comment suggests that the competitive implications of high concentration among firms (such as the 90 percent level rebuttable presumption contained in the Act) depend critically on other conditions in the market. The comment noted that "the presumption that high concentration is associated with market power is often rebutted by evidence that entry is timely, likely, and sufficient or that anticompetitive effects are unlikely for other reasons, such as the ability of smaller incumbent suppliers to expand output quickly.
GPSC is considering a two-step analysis that may trigger its temporary intervention in retail natural gas markets. In the first phase, GPSC is proposing to access whether prudent retail customers would be harmed by suppliers' efforts to exercise market power. The FTC staff suggests that in assessing the likelihood of significant market power, the GPSC should consider not only market concentration, but also the extent to which an anticompetitive price increase would cause consumers to reduce their purchases from larger incumbent natural gas firms, cause smaller sellers to expand, and cause new sellers to enter the natural gas market. The proposed "prudent customer" standard, therefore, should accurately reflect retail customer behavior, the comments state.
In the second phase, the GPSC would assess how actual prices compare to a competitive benchmark. On this point, the staff comments suggest that if GPSC has evidence of substantial, nontransitory market power in retail natural gas markets, it should consider structural remedies and, in particular, it may wish to review policies that maintain supply bottlenecks by impeding entry of investments, as well as customer access to pricing information and the costs of switching providers.
The Commission vote authorizing the staff to file the comments with the Public Service Commission was 5-0. (File No. V030010; staff contact is Michael Wroblewski, Office of the General Counsel, 202-326-2155.)
Commission approval of final consent order: Following a public comment period, the Commission has approved the issuance of a final consent order in the matter concerning Indiana Household Movers and Warehousemen, Inc. and issued a response to the commenter of record. The Commission vote to approve the final consent order was 5-0. (FTC File No. 021-0115; staff contact is Dana Abrahamsen, Bureau of Competition, 202-326-2906; see press release dated March 18, 2003.)
Copies of the documents mentioned in this release are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. Call toll-free: 1-877-FTC-HELP.