By Siobhan Hughes Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Federal regulators grappled with questions about influence over power prices as they opened talks on whether to make it easier for large investors such as hedge funds to increase stakes in the electric-power sector.
"We're all struggling with a way to continue allowing additional investment in the industry, protect customers...and try to provide some sort of clarity to the regulations so you all know what you do or don't have to file," said Cynthia Marlette, general counsel of the Federal Energy Regulatory Commission, at a technical conference on Wednesday.
The Electric Power Supply Association earlier this year asked FERC to allow passive investors to take stakes of as much as 20% in multiple power companies, up from about 10%, without prior regulatory approval. The group initially wanted to ensure that power producers such as Mirant Corp. (MIR) and Calpine Corp. (CPN) would retain their ability to sell at market-based rates even if they had a large shareholder in common. Power producers must submit filings to FERC related to company ownership.
But as a credit crunch made it harder for companies to gain financing, hedge funds and power-plant representatives reframed the issue. Hedge-fund lawyers began saying that loosening restrictions would attract investment money to the power sector.
Independent power producers argue that investors who have certified their status as passive investors through a 13-g filing with the Securities and Exchange Commission would have no ability to influence power prices because they would have no control over plant operations. But some people are wary.
"Where is there a common thread between the intent of 13G and what the FERC needs to do to ensure that a transaction is in the public interest?" said Diana Moss, a vice president at the American Antitrust Institute, who participated by phone. "I don't see that there's any commonality there at all."
Jeff Dennis, director of federal regulatory affairs at the Edison Electric Institute, which represents power companies, said that those concerns miss the point. "The key is: does 13G give you the kind of information that will also satisfy the commission's concerns? I think we're a bit far afield when we start saying, well, the purposes of the two statutes are not really the same."
Some regulators also raised questions about whether large investors would have an ability to exert influence even without the ability to control a company. If regulators decide that some types of ownership don't raise concerns about control, the question is whether "they can do things outside of that that will still have competitive impact," said Carol Johnson, a FERC attorney who works in the general counsel's office.
But power producers said that without control, investors lacked influence. There could be "a lot of incentive, but (if) they don't control us, I don't know how they could do anything with that incentive," said Sarah Novosel, senior vice president at Calpine, a power producer.
The conference came one month after FERC authorized the hedge fund Harbinger Capital Partners and an affiliate to take a stake of as much as 25% in Mirant. In February, the hedge-fund group reported a stake of 24.4% in Calpine.
"We're very competitive with them," Novosel said of Mirant. "The only reason we would not want to compete with them is if Harbinger told us not to, but they don't because they don't control us. That's the point we're trying to make."
-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; Siobhan.Hughes@dowjones.com
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(END) Dow Jones Newswires
December 03, 2008 16:14 ET (21:14 GMT)

Publié le 03 Décembre 2008 Copyright © 2008 Dowjones