MERGERS AND ACQUISITIONS

Large-scale transfer of ownership of generating assets is altering the landscape of the deregulated energy markets. Large utilities are being required to divest key assets to qualify for entry into competitive market, while new acquisitions can rapidly enable a handful of owners to dominate a particular market. A plant owner in a deregulated market can exercise market power through locational advantage (e.g. transmission bottlenecks), superior assets (e.g. hydro resources which are profitable in ancillary service markets), or skillful bidding strategy. State regulators and other interested parties need quantitative assessments of market power exercised by plant owners. LCG fields a strong pool of experienced talent and analytics to address complex M&A issues. To quantify market power, LCG uses the Multi-Commodity Multi-Area Optimal Power Flow model. Analytics go beyond simple (but misleading) percentage of generating capacity in the market, such as HHI measures.

RECENT ENGAGEMENTS

An Analysis of Generation Market Power in the Midwest Interconnect
LCG uses DOJ approved HHI (Herfindalh-Hirshmann Index) calculated hourly in various locations, as well as two other tests, to reach the conclusion that an opportunity exists for the exercise of market power as a merged entity, due to the ability of the two generation owners to cause prices to rise through strategic bidding.

Market Power Analysis for UtilitCorp's FERC Merger Filing (Aquila Energy Corp.)
LCG provided Market Model Simulation and Testimony Support to the Missouri Public Service Commission