FERC Retains More Stringent HHI Values for Market Power Assessment

FERC has decided to retain its existing policies regarding the analysis of horizontal market power when reviewing transactions under section 203 of the Federal Power Act and in its electric market-based rate program (RM11-14).

FERC had opened an inquiry after the Department of Justice (DOJ) and Federal Trade Commission (FTC) issued updated Horizontal Merger Guidelines in August 2010.

Among other things, the DOJ/FTC Guidelines use higher Herfindahl-Hirschman Index values to denote market concentration than currently used by FERC.

FERC said that its more stringent HHI thresholds are appropriate, especially given the distinctive characteristics of electricity markets. "We also agree with commenters that it is an inappropriate application of the 2010 Guidelines to selectively incorporate the HHI thresholds from the 2010 Guidelines without other aspects and that doing so could undermine the Commission's ability to accurately assess the competitive effects of a merger," FERC said.