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The Brattle Group frequently advises applicants, third parties, firms contemplating transactions, and competition authorities on mergers and acquisitions in the energy sector. We have presented expert testimony and findings on the potential competitive impacts of vertical and horizontal mergers involving electric and natural gas businesses before regulators and antitrust enforcement agencies in North America and the European Union. We have also been retained to provide advisory services to competition authorities, legal counsel, interveners in regulatory proceedings, and the firms involved in transactions. Our experts have appeared before numerous U.S. and international regulatory bodies, including the Federal Trade Commission, the Federal Energy Regulatory Commission (FERC), the Surface Transportation Board, the Securities and Exchange Commission, the U.S. Department of Justice, various state commissions, the Canadian Competition Bureau, the Dutch Competition Authority, the European Commission, and the German Federal Cartel Office.

Our team of experts uses a variety of economic analyses, including the FERC’s Delivered Price Test, Cournot models, and customized market simulation models to analyze a proposed merger’s effect on the market participant’s ability and incentive to exercise market power. Our knowledge and experience in energy regulation and antitrust economics, combined with our use of state-of-the-art simulation models and statistical techniques, allows us to provide reliable qualitative and quantitative assessments of the likely competitive impact of mergers and acquisitions.

Engagements
REPRESENTATIVE ENGAGEMENTS

Below is a list of representative engagements for our Energy Mergers & Acquisitions practice.

Power company acquisition of a merchant power plant
The Brattle Group assisted a buyer utility seeking to acquire a generating facility in its market area with the market impact analyses required by the FERC and the U.S. DOJ. Using the procedures set forth in the FERC’s merger guidelines, we examined the potential competitive impact of the transaction and demonstrated that the power company had no ability or incentive to foreclose rivals.
FERC and state merger evaluations using DPT and related tools
In several cases, Brattle has been engaged by applicants as well as opponents to determine whether a proposed merger could satisfy FERC’s Delivered Price Test (DPT) criteria for benign impacts on competition. These analyses require a detailed evaluation of the extent of regionally-deliverable and economic electricity supply that can discipline the merged parties potential influence on market prices. They also require analyses on vertical relationships between the parties and the fuel and transmission resources serving their market area.

We have frequently filed direct testimony at the FERC and at state public service commissions on the competitive impacts of the proposed mergers on the electricity market, in such jurisdictions as New York, Wisconsin, Kansas, Nevada, Pennsylvania, and New Jersey. These reports addressed whether the combined entity would have an ability to foreclose or raise their rivals’ costs, the impact of the merger on both upstream (delivered gas) and downstream markets, and any short-term incentive to exercise vertical wholesale market power created by the merger. Where necessary, mitigation measures have been identified to relieve market power in overly-concentrated segments and locations.

Application of game theory to market power analysis
The Brattle Group conducted a market power analysis to guide divestiture of two merging utilities’ generation assets. We developed a Cournot market simulation model and conducted FERC market share analyses. Additionally, we assessed the companies’ merger mitigation plan and examined the role of the proposed RTO as well as the companies’ post divestiture tariffs. We filed testimony before the FERC and state regulators.
German electric and natural gas merger
The Brattle Group assessed the horizontal and vertical market power effects of two major German utility mergers. Our analysis examined the potential for increased market power through coordinated interaction, through the merger partners’ control over transmission access and import capabilities, as well as through increased merger-related concentration of the natural gas transport market. The findings were presented to the Merger Task Force of the European Commission and the German Federal Cartel Office.
Exxon and Mobil

For an international energy company, we analyzed the effect of a proposed merger between Exxon and Mobil. We examined the impact of the proposed merger on several European gas markets. We performed a separate competitive analysis for each of the following segments of the supply chain: production/importation, purchase and sale of natural gas, and transportation/distribution. We recommended conditions for the European Commission to impose on the merged company should the merger be approved. Our report proposed a methodology for analyzing market power that focused on the impact of common shareholdings among different natural gas companies. The client provided our report to the European Commission and the Commission adopted our proposed methodology.

Assessment of potential merger impacts on retail electric services
The Brattle Group assisted the senior management of an East Coast electric utility in evaluating the likely effects of retail access on the financial health of our client and its potential merger partner. We developed a set of scenarios that characterized the timing of open access competition, possible market prices for electric power, customer loss rates, and stranded cost recovery. We developed, applied, and transferred to the client a detailed model evaluating the financial performance and market value of the firm under the various scenarios.
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