CMS Energy Settles FTC Charges

CMS Energy Corporation will settle Federal Trade Commission charges that its acquisition of two natural gas pipelines - Panhandle Eastern Pipeline and Trunkline Pipeline - from subsidiaries of Duke Energy Company could limit competition and drive up consumer prices for natural gas and electricity in 54 counties in Michigan. The FTC complaint alleges that the acquisition could lessen pipeline capacity in violation of federal antitrust laws. The settlement would require that Consumers Energy, a CMS subsidiary, "loan" natural gas from its own system to shippers on third-party pipelines if its interconnect capacity with those pipelines falls below historical levels.

In October, 1998, CMS agreed to purchase the Panhandle and Trunkline pipelines from Pan Energy Corp. and Texas Eastern Corp., Duke subsidiaries, for $2.2 billion. CMS is based in Dearborn, Michigan. Duke is headquartered in Charlotte, North Carolina.

According to the FTC complaint, Consumers Energy, a CMS subsidiary, provides natural gas to residential and industrial consumers in 54 counties in the lower peninsula of Michigan. It also owns and operates the only intra-state natural gas transmission system through which consumers can buy natural gas from other suppliers, either for their own use, or to use to produce electricity. Natural gas consumed in the 54-county area has been provided through five major pipelines: ANR Pipeline Co.; Great Lakes Transmission, L.P.; Michigan Consolidated Gas Co.; and the two pipelines CMS is acquiring. Each of the pipelines has one or more points of interconnection with the Consumers Energy system. Maximum rate charges for transmission through these pipelines are set either by the Federal Energy Regulatory Commission or the Michigan Public Service Commission. Competition among the pipelines has resulted in rates well below the maximums established by the regulatory agencies.

As a customer of interstate transportation services, Consumer Energy has had an incentive to maintain competitive access into its system to maintain maximum flexibility and minimum prices for the delivery of gas into its system. But after the acquisition of the Panhandle and Trunkline pipelines, CMS would have an incentive to restrict the other pipelines access to the Consumer Energy system to support price increases on Trunkline and Panhandle. Such action could increase the price of natural gas and electricity for consumers and industrial users, according to the complaint.

The proposed settlement would prevent CMS from restricting or eliminating interconnection capacity available to the pipelines that compete with Panhandle and Trunkline. It would require CMS to give shippers the choice of two options if the interconnection capacity with competing pipelines falls below historical levels. First, if CMS cannot accept a shipment at the regular interconnect point, but the shipper is able to provide its shipment at another point at no additional cost to the shipper, CMS would accept the gas at the other pipeline interconnect point. If the shipper would incur additional cost or if no other interconnection point is available, CMS would be required to provide gas from its own supply, essentially loaning the gas, until the shipper can access the interconnect point and replace it. The settlement also would require CMS to post information about the capacity, shipments and throughput of the system on an electronic bulletin board.

The Commission vote to accept the proposed consent agreement was 3-0, with Commissioner Orson Swindle not participating for medical reasons.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation.

An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

Copies of the complaint and consent order 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; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 991 0046)