Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 49477 

The form is used by persons who are 

members of the United States Armed 

Forces. 

(5) An estimate of the total number of 

respondents and the amount of time 

estimated for an average respondent to 

respond: It is estimated that 9,000 

respondents will complete a 30 minute 

form. 

(6) An estimate of the total public 

burden (in hours) associated with the 

collection: There are an estimated 4,500 

annual total burden hours associated 

with this collection. 

If additional information is required 

contact: Lynn Bryant, Department 

Clearance Officer, Policy and Planning 

Staff, Justice Management Division, 

Department of Justice, Patrick Henry 

Building, Suite 1600, 601 D Street NW., 

Washington, DC 20530. 

Dated: August 17, 2006. 

Lynn Bryant, 

Department Clearance Officer, Department of 

Justice. 

[FR Doc. E6–13937 Filed 8–22–06; 8:45 am] 

BILLING CODE 4410–FY–P 

DEPARTMENT OF JUSTICE 

Antitrust Division 

United States of America v. Exelon 

Corporation and Public Service 

Enterprise Group Incorporated; 

Proposed Final Judgment and 

Competitive Impact Statement 

Notice is hereby given pursuant to the 

Antitrust Procedures and Penalties Act, 

15 U.S.C. 16(b)–(h), that a proposed 

Final Judgment, Hold Separate 

Stipulation and Order, and Competitive 

Impact Statement have been filed with 

the United States District Court for the 

District of Columbia in United States of 

America v. Exelon Corporation and 

Public Service Enterprise Group 

Incorporated, Civil Action No. 

1:06CV01138. On June 22, 2006, the 

United States filed a Complaint alleging 

that the proposed acquisition by Exelon 

Corporation (‘‘Exelon’’) of Public 

Service Enterprise Group Incorporated 

(‘‘PSEG’’) would violate Section 7 of the 

Clayton Act, 15 U.S.C. 18. The 

Complaint alleges that the acquisition 

would reduce competition substantially 

for wholesale electricity in the MidAtlantic United States. Specifically, the 

Complaint alleges that Exelon’s 

acquisition of PSEG’s electric generation 

assets would enhance Exelon’s ability 

and incentive to raise wholesale 

electricity prices, resulting in increased 

retail electricity prices for millions of 

residential, commercial, and industrial 

customers. The proposed Final 

Judgment requires Exelon and PSEG to 

divest six electric generation plants. The 

plants to be divested are Cromby 

Generating Station and Eddystone 

Generating Station in Pennsylvania and 

Hudson Generating Station, Linden 

Generating Station, Mercer Generating 

Station, and Sewaren Generating Station 

in New Jersey. 

Copies of the Complaint, proposed 

Final Judgment, Hold Separate 

Stipulation and Order, and Competitive 

Impact Statement are available for 

inspection at the Department of Justice, 

Antitrust Division, Antitrust Documents 

Group, 325 7th Street, NW., Room 215, 

Washington, DC 20530 (telephone: 202–

514–2481), on the Department of 

Justice’s Web site at http:// 

www.usdoj.gov/atr, and at the Office of 

the Clerk of the United States District 

Court for the District of Columbia. 

Copies of these materials may be 

obtained from the Antitrust Division 

upon request and payment of the 

copying fee set by Department of Justice 

regulations. 

Public comment is invited within 

sixty (60) days of the date of this notice. 

Such comments, and responses thereto, 

will be published in the Federal 

Register and filed with the Court. 

Comments should be directed to Donna 

N. Kooperstein, Chief, Transportation, 

Energy & Agriculture Section, Antitrust 

Division, Department of Justice, 325 7th 

Street, NW., Suite 500, Washington, DC 

20530 (telephone: 202–307–3278). 

Patricia A. Brink, 

Deputy Director of Operations, Antitrust 

Division. 

United States District Court, District of 

Columbia 

United States of America, U.S. 

Department of Justice, Antitrust 

Division, 325 7th Street, NW., Suite 500, 

Washington, DC 20530, Plaintiff, v. 

Exelon Corporation, 10 South Dearborn 

Street, Chicago, IL 60603, and Public 

Service Enterprise Group, Incorporated, 

880 Park Plaza, P.O. Box 1171, Newark, 

NJ 07101–1171, Defendants 

Case No. 1:06CV01138 

Judge: John D. Bates 

Deck Type: Antitrust 

Date Stamp: 06/22/2006 

Complaint 

The United States of America, acting 

under the direction of the Attorney 

General of the United States, brings this 

civil action to enjoin the merger of 

Exelon Corporation (‘‘Exelon’’) and 

Public Service Enterprise Group 

Incorporated (‘‘PSEG’’) and alleges as 

follows: 

1. On December 20, 2004, Exelon 

entered into an agreement to merge with 

PSEG. The transaction would create one 

of the largest electricity companies in 

the United States, with total assets of 

$79 billion and annual revenues of $27 

billion. 

2. Exelon and PSEG compete to sell 

wholesale electricity throughout the 

Mid-Atlantic and in Illinois, North 

Carolina, West Virginia, and Ohio. 

3. Exelon and PSEG are the two 

largest electricity firms in the area 

encompassing central and eastern 

Pennsylvania, New Jersey, Delaware, the 

District of Columbia, and parts of 

Maryland and Virginia. Together, they 

would account for more than 35 percent 

of the electric generating capacity in this 

area and would have wholesale 

electricity revenues of approximately 

$4 billion. 

4. In the eastern portion of this area, 

which includes the densely populated 

northern New Jersey and Philadelphia 

areas, Exelon and PSEG together would 

account for more than 45 percent of the 

electric generating capacity in this area 

and would have wholesale electricity 

revenues of approximately 

$3 billion. 

5. Exelon’s merger with PSEG would 

eliminate competition between them 

and give the merged firm the incentive 

and the ability to raise wholesale 

electricity prices, resulting in increased 

retail electricity prices for millions of 

residential, commercial, and industrial 

customers in these areas. 

6. Accordingly, the merger would 

substantially lessen competition in 

violation of Section 7 of the Clayton 

Act, 15 U.S.C. 18. 

I. Jurisdiction and Venue 

7. This action is filed by the United 

States under Section 15 of the Clayton 

Act, as amended, 15 U.S.C. 25, to 

prevent and restrain Defendants from 

violating Section 7 of the Clayton Act, 

15 U.S.C. 18. 

8. Exelon and PSEG are engaged in 

interstate commerce and in activities 

substantially affecting interstate 

commerce. The Court has jurisdiction 

over this action and the parties pursuant 

to Sections 15 and 16 of the Clayton 

Act, 15 U.S.C. 25, 26; and 28 U.S.C. 

1331, 1337. 

9. Exelon and PSEG transact business 

and are found in the District of 

Columbia. Venue is proper under 

Section 12 of the Clayton Act, 15 U.S.C. 

22; and 28 U.S.C. 1391(c). 

II. The Defendants and the Transaction 

10. Defendant Exelon is a 

Pennsylvania corporation, with its 

headquarters in Chicago, Illinois. Exelon 


sroberts on PROD1PC70 with NOTICES
49478 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 

owns Exelon Generation Company, LLC, 

which owns electric generating plants 

located primarily in the Mid-Atlantic 

and the Midwest with a total generating 

capacity of more than 25,000 megawatts 

(‘‘MW’’). Exelon also owns two 

electricity retailers that buy wholesale 

electricity and resell it to consumers: 

PECO Energy Company, a gas and 

electric utility that serves customers in 

the Philadelphia area; and 

Commonwealth Edison Company, an 

electric utility that serves customers in 

northern Illinois. 

11. Defendant PSEG is a New Jersey 

corporation, with its headquarters in 

Newark, New Jersey. PSEG owns PSEG 

Power LLC, which owns electric 

generating plants located primarily in 

New Jersey with a total generating 

capacity of more than 15,000 MW. PSEG 

also owns a gas and electric utility, 

Public Service Electric and Gas 

Company, that serves customers in New 

Jersey. 

12. Following Exelon’s merger with 

PSEG, the combined company would be 

known as Exelon Electric & Gas, with 

corporate headquarters in Chicago. 

III. Trade and Commerce 

A. Background 

13. Electricity supplied to retail 

customers is generated at electric 

generating plants, which consist of one 

or more generating units. An individual 

generating unit uses any one of several 

types of generating technologies 

(including hydroelectric turbine, steam 

turbine, combustion turbine, or 

combined cycle) to transform the energy 

in fuels or the force of following water 

into electricity. The fuels used by a 

generating unit include uranium, coal, 

oil, or natural gas. 

14. Generating units vary 

considerably in their operating costs, 

which are determined primarily by the 

cost of fuel and the efficiency of the 

technology in transforming the energy 

in fuel into electricity. ‘‘Baseload’’

units—which typically include nuclear 

and some coal-fired steam turbine 

units—have relatively low operating 

costs. ‘‘Peaking’’ units—which typically 

include oil- and gas-fired combustion 

turbine units—have relatively high 

operating costs. ‘‘Mid-merit’’ units—

which typically include combined-cycle 

and some coal-fired steam turbine 

units—have costs lower than those of 

peaking units but higher than those of 

baseload units. 

15. Once electricity is generated at a 

plant, an extensive set of interconnected 

high-voltage lines and equipment, 

known as the transmission grid, 

transports the electricity to lower 

voltage distribution lines that relay the 

power to homes and businesses. 

Transmission grid operators must 

closely monitor the grid to prevent too 

little or too much electricity from 

flowing over the grid, either of which 

might damage lines or generating units 

connected to the grid. To prevent such 

damage and to prevent widespread 

blackouts from disrupting electricity 

service, a grid operator will manage the 

grid to prevent any more electricity from 

flowing over a transmission line as that 

line approaches its operating limit (a 

‘‘transmission constraint’’). 

16. In the Mid-Atlantic, the 

transmission grid is overseen by PJM 

Interconnection, LLC (‘‘PJM’’), a private, 

non-profit organization whose members 

include transmission line owners, 

generation owners, distribution 

companies, retail customers, and 

wholesale and retail electricity 

suppliers. The transmission grid 

administered by PJM is the largest in the 

United States, providing electricity to 

approximately 51 million people in an 

area encompassing New Jersey, 

Pennsylvania, Delaware, Maryland, 

Virginia, West Virginia, the District of 

Columbia, and parts of North Carolina, 

Kentucky, Ohio, Indiana, Michigan, 

Tennessee, and Illinois (the ‘‘PJM 

control area’’). 

17. PJM oversees two auctions for the 

sale and purchase of wholesale 

electricity: a day-ahead auction that 

clears the day before the electricity is 

required, and a real-time auction that 

clears the day the electricity is required. 

Generation owners located in the PJM 

control area sell through these auctions 

to electricity retailers that provide retail 

electric service in the PJM control area. 

Buyers and sellers of wholesale 

electricity may also enter into contracts 

for the sale and purchase of electricity 

with each other, or third parties, outside 

of the PJM auction process; prices for 

these bilateral contracts generally reflect 

expected auction prices. 

18. In the day-ahead auction, each 

buyer typically submits to PJM the 

amount of electricity the buyer expects 

to need each hour of the next day. Then 

PJM adds up the amount of electricity 

buyers will need to determine how 

much electricity will be demanded each 

hour. Each seller submits to PJM an 

offer to sell electricity indicating the 

amount of electricity it is willing to sell 

the next day and the price at which it 

is willing to sell. Then PJM sorts the 

offers to sell from lowest to highest offer 

price to determine how much electricity 

will be supplied at any given price. 

19. Subject to the physical and 

engineering limitations of the 

transmission grid, PJM seeks to have 

generating units operated in ‘‘merit’’

order, from lowest to highest offer. In 

the day-ahead auction, as long as 

transmission constraints are not 

expected, PJM takes the least expensive 

offer first and then continues to accept 

offers to sell at progressively higher 

prices until the needs for each hour the 

next day are covered. In this way, PJM 

minimizes the total cost of generating 

electricity required for the next day. The 

clearing price for any given hour 

essentially is determined by the 

generating unit with the highest offer 

price that is needed for that hour, and 

all sellers for that hour receive that price 

regardless of their offer price or their 

units’ costs. In the real-time auction, 

which accounts for differences between 

anticipated and actual supply and 

demand, PJM accepts sellers’ offers in 

merit order, subject to the physical and 

engineering limitations of the 

transmission grid, until there is a 

sufficient quantity of electricity to meet 

actual demand. 

20. At times, transmission constraints 

prevent the generating units with the 

lowest offers from meeting demand in a 

particular area within the PJM control 

area. When that happens, PJM often 

calls on more expensive units located 

within the smaller area bounded by the 

transmission constraints (a ‘‘constrained 

area’’), and the clearing price for the 

buyers in that area adjusts accordingly. 

Because more expensive units are 

required to meet demand, the clearing 

price in a constrained area will be 

higher than it would be absent the 

transmission constraints. 

21. PJM East. One historically 

constrained area within the PJM control 

area includes the densely populated 

northern New Jersey and Philadelphia 

areas. This area (‘‘PJM East’’) is defined 

by the ‘‘Eastern Interface,’’ a set of five 

major transmission lines that divides 

New Jersey and the Philadelphia area 

from the rest of the PJM control area. 

When the Eastern Interface is 

constrained, PJM is limited in its ability 

to supply demand located east of the 

constraint with electricity from 

generating units located west of the 

constraint. PJM often responds to 

constraints on the Eastern Interface by 

calling on additional generating units 

east of the constraint to run, generally 

resulting in higher prices in PJM East 

because the cost of additional 

generation east of the constraint is 

higher than the cost of additional 

generation west of the constraint 

22. In PJM East during 2005, more 

than $10 billion of wholesale electricity 

was sold for resale to nearly 6 million 

retail customers. 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 49479 

23. PJM Central/East. A second 

constrained area in PJM includes PJM 

East and central Pennsylvania. This area 

is defined by two major transmission 

lines known as ‘‘5004’’ and ‘‘5005’’ that 

run from western to central 

Pennsylvania and divide the area east of 

the lines (‘‘PJM Central/East’’) from the 

rest of PJM. When the 5004 and 5005 

transmission lines are constrained, PJM 

is limited in its ability to supply 

demand located east of the constraint 

with electricity from generating units 

located west of the constraint. PJM often 

responds to constraints on the 5004 and 

5005 lines by calling on additional 

generating units east of the constraint to 

run, generally resulting in higher prices 

in PJM Central/East because the cost of 

additional generation east of the 

constraint is higher than the cost of 

additional generation west of the 

constraint. 

24. In PJM Central/East during 2005, 

more than $19 billion of wholesale 

electricity was sold for resale to nearly 

9 million retail customers. 

B. Relevant Product Market 

25. Wholesale electricity is a relevant 

product market and a line of commerce 

within the meaning of Section 7 of the 

Clayton Act. In the event of a small but 

significant increase in the price of 

wholesale electricity, insufficient 

purchasers would switch away to make 

that increase unprofitable. 

C. Relevant Geographic Markets 

26. When the Eastern Interface is 

constrained, purchasers of wholesale 

electricity for use in PJM East have 

limited ability to turn to generation 

outside of PJM East. At such times, the 

amount of electricity that could be 

purchased outside PJM East is 

insufficient to make it unprofitable for 

generators located inside PJM East to 

seek a small but significant price 

increase. 

27. PJM East is a relevant geographic 

market and a section of the country 

within the meaning of Section 7 of the 

Clayton Act. 

28. When the 5004 and 5005 

transmission lines are constrained, 

purchasers of wholesale electricity in 

PJM Central/East have limited ability to 

turn to generation outside of PJM 

Central/East. At such times, the amount 

of electricity that could be purchased 

outside PJM Central/East is insufficient 

to make it unprofitable for generators 

located inside PJM Central/East to seek 

a small but significant price increase. 

29. PJM Central/East is a relevant 

geographic market and a section of the 

country within the meaning of Section 

7 of the Clayton Act. 

IV. Anticompetitive Effects 

A. Market Shares and Concentration 

30. Exelon owns approximately 20 

percent of the generating capacity in 

PJM East. PSEG owns approximately 29 

percent of the generating capacity in 

PJM East. After the merger, Exelon 

would own approximately 49 percent of 

the total generating capacity in PJM 

East. 

31. Using a measure of market 

concentration called the HerfindahlHirschman Index (‘‘HHI’’), explained in 

Appendix A, Exelon’s merger with 

PSEG would yield a post-merger HHI in 

PJM East of more than 2,700, 

representing an increase of more than 

1,100. 

32. Exelon owns approximately 19 

percent of the generating capacity in 

PJM Central/East. PSEG owns 

approximately 21 percent of the 

generating capacity in PJM Central/East. 

After the merger, Exelon would own 

approximately 40 percent of the total 

generating capacity in PJM Central/East. 

33. Exelon’s merger with PSEG would 

yield a post-merger HHI in PJM Central/ 

East of approximately 2,100, 

representing an increase of 

approximately 800. 

B. Effect of Transaction 

34. In addition to owning a significant 

share of overall generating capacity in 

PJM East and PJM Central/East, the 

merged firm will own generating units 

with a wide range of operating costs, 

including low-cost baseload units that 

provide the incentive to exercise market 

power, mid-merit units that provide the 

ability and incentive to exercise market 

power, and certain peaking units that 

provide additional ability to exercise 

market power in times of high demand. 

The combination of Exelon’s and 

PSEG’s generating units would 

significantly enhance Exelon’s ability 

and incentive to reduce output and raise 

prices in PJM East and PJM Central/East. 

35. The merger would enhance 

Exelon’s ability to reduce output and 

raise prices in PJM East and PJM 

Central/East by increasing its share of 

mid-merit and peaking capacity in those 

markets. With a greater share of midmerit and peaking capacity, Exelon 

would more often be able to reduce 

output and raise clearing prices at 

relatively low cost to it by withholding 

capacity. Exelon could withhold 

capacity in several ways. For example, 

it could submit high offers in the PJM 

auctions for some of the capacity from 

its mid-merit units such that they are 

not all called on to produce electricity. 

By reducing its output, Exelon could 

force PJM to turn to more expensive 

units to meet demand, resulting in 

higher clearing prices in PJM East and 

PJM Central/East. 

36. The merger would enhance 

Exelon’s incentive to reduce output and 

raise price in PJM East and PJM Central/ 

East by increasing the amount of 

baseload and mid-merit capacity it owns 

in these markets. With a greater amount 

of baseload and mid-merit capacity, 

Exelon would more often find it 

profitable to reduce output and raise 

market-clearing prices by withholding 

capacity. For example, as clearing prices 

increase due to its withholding certain 

of its mid-merit capacity, Exelon would 

earn those higher prices on its expanded 

post-merger baseload capacity, which 

almost always runs, making it more 

likely that the benefit of increased 

revenues on its baseload capacity would 

outweigh the cost of withholding midmerit capacity. 

37. Increasing Exelon’s incentive and 

ability to profitably withhold output 

makes it likely that Exelon will exercise 

market power after its merger with 

PSEG, resulting in significant harm to 

competition and increased prices. Thus, 

the effect of the merger may be 

substantially to lessen competition in 

violation of Section 7 of the Clayton 

Act. 

V. Entry 

38. Entry into the wholesale 

electricity market through the addition 

of new generating capacity in PJM East 

or PJM Central/East or the addition of 

new transmission capacity that would 

relieve the constraints that limit the 

flow of electricity into PJM East or PJM 

Central/East would take many years, 

especially considering the necessary 

environmental, safety, and zoning 

approvals. 

39. Entry into the PJM East or PJM 

Central/East wholesale electricity 

market would not be timely, likely, and 

sufficient in its magnitude, character, 

and scope to deter or counteract an 

anticompetitive price increase. 

VI. Violation Alleged 

40. The effect of Exelon’s proposed 

merger with PSEG, if it were 

consummated, may be substantially to 

lessen competition for wholesale 

electricity in PJM East and PJM Central/ 

East in violation of Section 7 of the 

Clayton Act, 15 U.S.C. 18. Unless 

restrained, the transaction would likely 

have the following effects, among 

others: 

a. competition in the market for 

wholesale electricity in PJM East would 

be substantially lessened; 

b. prices for wholesale electricity in 

PJM East would increase; 


sroberts on PROD1PC70 with NOTICES
49480 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 

c. competition in the market for 

wholesale electricity in PJM Central/ 

East would be substantially lessened; 

and 

d. prices for wholesale electricity in 

PJM Central/East would increase. 

VII. Request for Relief 

The United States requests: 

41. that Exelon’s proposed merger 

with PSEG be adjudged a violation of 

Section 7 of the Clayton Act, 15 U.S.C. 

18; 

42. that Defendants be permanently 

enjoined and restrained from carrying 

out the Agreement and Plan of Merger 

dated December 20, 2004, or from 

entering into or carrying out any 

agreement, understanding, or plan by 

which Exelon would merge with or 

acquire PSEG, its capital stock or any of 

its assets; 

43. that the United States be awarded 

the costs of this action; and 

44. that the United States have such 

other relief as the Court may deem just 

and proper. 

Dated: June 22, 2006. 

Respectfully submitted. 

For Plaintiff United States: 

Thomas O. Barnett, 

Assistant Attorney General. 

J. Bruce McDonald, 

Deputy Assistant Attorney General. 

Dorothy B. Fountain, 

Deputy Director of Operations. 

Donna N. Kooperstein, 

Chief, Transportation, Energy & Agriculture 

Section. 

William H. Stallings, 

Assistant Chief, Transportation, Energy & 

Agriculture Section. 

Mark J. Niefer (DC Bar #470370), 

Jade Alice Eaton (DC Bar #939629), 

Tracy Lynn Fisher (MN Bar #315837), 

Jennifer L. Cihon (OH Bar #0068404), 

J. Richard Doidge (MA Bar #600158), 

Angela L. Hughes (DC Bar #303420), 

J. Chandra Mazumdar (WI Bar #1030967), 

James A. Ryan, 

John M. Snyder (DC Bar #456921), 

Stephanie Toussaint (TX Bar #24045253), 

Janet Urban, 

David S. Zlotow (CA Bar #235340), 

Trial Attorneys, U.S. Department of Justice, 

Antitrust Division, Transportation, Energy 

& Agriculture Section, 325 7th Street, NW., 

Suite 500, Washington, DC 20004. 

Telephone: (202) 307–6318. Facsimile: 

(202) 307–2784. 

Appendix A—Definition of HHI 

The term ‘‘HHI’’ means the HerfindahlHirschman Index, a commonly accepted 

measure of market concentration. The HHI is 

calculated by squaring the market share of 

each firm competing in the market and then 

summing the resulting numbers. For 

example, for a market consisting of four firms 

with shares of 30, 30, 20, and 20 percent, the 

Hill is 2,600 (302 + 302 + 202 + 202 = 2,600). 

The HHI takes into account the relative size 

and distribution of the firms in a market. It 

approaches zero when a market is occupied 

by a large number of firms of relatively equal 

size and reaches its maximum of 10,000 

when a market is controlled by a single firm. 

The HID increases both as the number of 

firms in the market decreases and as the 

disparity in size between those firms 

increases. 

Markets in which the HHI is between 1,000 

and 1,800 are considered to be moderately 

concentrated, and markets in which the HHI 

is in excess of 1,800 points are considered to 

be highly concentrated. See Horizontal 

Merger Guidelines ¶ 1.51 (revised Apr. 8, 

1997). Transactions that increase the HHI by 

more than 100 points in highly concentrated 

markets presumptively raise significant 

antitrust concerns under the Department of 

Justice and Federal Trade Commission. See 

id. 

Certificate of Service 

I hereby certify that on June 22, 2006, 

I caused a copy of the foregoing 

Complaint, proposed Final Judgment, 

Hold Separate Stipulation and Order, 

and Plaintiff United States’ Explanation 

of Procedures for Entry of the Final 

Judgment to be served on counsel for 

defendants in this matter in the manner 

set forth below: 

By electronic mail and hand delivery: 

Counsel for Defendant Exelon 

Corporation, John M. Nannes (DC Bar 

#195966), John H. Lyons (DC Bar 

#453191), Skadden, Arps, Slate, 

Meagher & Flom LLP, 1440 New York 

Avenue, NW., Washington, DC 20005. 

Telephone: (202) 371–7500. 

Facsimile: (202) 661–9191. 

Counsel for Defendant Public Service 

Enterprise Group Incorporated, 

Douglas G. Green (DC Bar #183343), 

Steptoe & Johnson LLP, 1330 

Connecticut Avenue, NW., 

Washington, DC 20036. Telephone: 

(202) 429–3000. Facsimile: (202) 429–

3902. 

Mark J. Niefer (DC Bar #470370), 

Department of Justice, Antitrust Division, 325 

Seventh Street, NW., Suite 500, 

Washington, DC 20530. Telephone: (202) 

307–6318. Facsimile: (202) 307–2784. 

United States District Court for the 

District of Columbia 

United States of America, Plaintiff; v. 

Exelon Corporation and Public Service 

Enterprise Group Incorporated, 

Defendants 

Case No.: 1:06CV01138 

Judge: John D. Bates 

Deck Type: Antitrust 

Filed: 06/22/06 

Proposed Final Judgment 

And Whereas, Plaintiff, United States 

of America, filed its Complaint on June 

22, 2006, relating to the proposed 

merger of Defendants Exelon 

Corporation (‘‘Exelon’’) and Public 

Service Enterprise Group Incorporated 

(‘‘PSEG’’); 

And Whereas, Defendants, by their 

respective attorneys, have consented to 

the entry of this Final Judgment without 

trial or adjudication of any issue of fact 

or law, and without this Final Judgment 

constituting any evidence against or 

admission by any party regarding any 

issue of fact or law; 

And Whereas, Defendants agree to be 

bound by the provisions of this Final 

Judgment pending its approval by the 

Court; 

And Whereas, the essence of this 

Final Judgment is the prompt 

divestiture of certain assets by 

Defendants to assure that competition is 

not substantially lessened; 

And Whereas, the United States 

requires Defendants to make certain 

divestitures for the purpose of 

remedying the loss of competition 

alleged in the Complaint; 

And Whereas, Defendants have 

represented to the United States that the 

divestitures required below can and will 

be made, subject to receipt of necessary 

regulatory approvals, and that 

Defendants will later raise no claim of 

mistake, hardship, or difficulty of 

compliance as grounds for asking the 

Court to modify any of the provisions 

contained below; 

Now Therefore, before any testimony 

is taken, without trial or adjudication of 

any issue of fact or law, and upon 

consent of the parties, it is Ordered, 

Adjudged, and Decreed: 

I. Jurisdiction 

The Court has jurisdiction over the 

subject matter of and each of the parties 

to this action. The Complaint states a 

claim upon which relief may be granted 

against Defendants under Section 7 of 

the Clayton Act, as amended, 15 U.S.C. 

II. Definitions 

As used in this Final Judgment: 

A. ‘‘Acquire’’ means obtain any 

interest in any electricity generating 

facility, including real property, deeded 

development rights to real property, 

capital equipment, buildings, or 

fixtures. 

B. ‘‘Acquirer’’ or ‘‘Acquirers’’ means 

the entity or entities to whom 

Defendants divest any of the Divestiture 

Assets or with whom Defendants have 

entered into definitive contracts to sell 

any of the Divestiture Assets. 

C. ‘‘Control’’ means have the ability, 

directly or indirectly, to set the level of, 

dispatch, or offer the output of one or 

more units of an electricity generating 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 49481 

facility or to operate one or more units 

of an electricity generating facility. 

D. ‘‘Designated Utility Zones’’ means 

the service territories in which the 

following companies on June 1, 2006, 

owned the wires through which 

electricity is distributed: 

1. Atlantic City Electric Company, 

2. Baltimore Gas and Electric 

Company, 

3. Delmarva Power and Light 

Company, 

4. Jersey Central Power and Light 

Company, 

5. Metropolitan Edison Company, 

6. Rockland Electric Company, 

7. PECO Energy Company, 

8. Potomac Electric Power Company, 

9. PPL Electric Utilities Corporation, 

and 

10. Public Service Electric and Gas 

Company. 

E. ‘‘Divestiture Assets’’ means the 

following facilities: (1) Cromby 

Generating Station, 100 Cromby Rd. at 

Phoenixville, PA, 19460; (2) Eddystone 

Generating Station, Number 1 Industrial 

Hwy. at Eddystone, PA, 19022; (3) 

Hudson Generating Station, Duffield & 

Van Keuren Aves. at Jersey City, NJ, 

07306; (4) Linden Generating Station, 

4001 South Wood Ave. at Linden, NJ, 

07036; (5) Mercer Generating Station, 

2512 Lamberton Rd. at Hamilton, NJ, 

08611; and (6) Sewaren Generating 

Station, 751 Cliff Rd. at Sewaren, NJ, 

07077; and 

a. For each of those facilities, all of 

Defendants’ rights, titles, and interests 

in any tangible and intangible assets 

relating to the generation, dispatch, and 

offering of electricity at the facility; 

including the land; buildings; fixtures; 

equipment; fixed assets; supplies; 

personal property; non-consumable 

inventory on site as of June 1, 2006; 

furniture; licenses, permits, and 

authorizations issued by any 

governmental organization relating to 

the facility (including environmental 

permits and all permits from federal or 

state agencies and all work in progress 

on permits or studies undertaken in 

order to obtain permits); plans for 

design or redesign of the facility or any 

assets at the facility; agreements, leases, 

commitments, and understandings 

pertaining to the facility and its 

operation; records relating to the facility 

or its operation, wherever kept and in 

whatever form (excluding records of 

past offers submitted to PJM); all 

equipment associated with connecting 

the facility to PJM (including automatic 

generation control equipment); all 

remote start capability or equipment 

located on site; and all other interests, 

assets, or improvements at the facility 

customarily used in the generation, 

dispatch, or offer of electricity from the 

facility; provided, however, that 

‘‘Divestiture Assets’’ shall not include 

(i) electric and gas distribution or 

transmission assets located in, or 

appurtenant to, the boundaries of the 

facility, or (ii) any communications 

links between the facility and 

Defendants, which will be 

disconnected. 

b. At the option of the Acquirer of the 

Linden Generating Station, the natural 

gas pipeline facilities connecting any 

assets at the Linden Generating Station 

(including the assets listed in Section 

ILE.a. for the Linden Generating 

Station), to an interconnection with the 

Texas Eastern Gas Transmission LP, and 

all of Defendants’ rights, titles, and 

interests in any tangible and intangible 

assets relating to the delivery of natural 

gas from the Texas Eastern Gas 

Transmission LP interconnection with 

the Linden Generating Station, 

including the land; buildings; fixtures; 

equipment; fixed assets; supplies; 

personal property; non-consumable 

inventory on site as of June I, 2006; 

furniture; licenses, permits, and 

authorizations issued by any 

governmental organization relating to 

the facility (including environmental 

permits and all permits from federal or 

state agencies and all work in progress 

on permits or studies undertaken in 

order to obtain permits); plans for 

design or redesign of the facility or any 

assets at the facility; agreements, leases, 

commitments, and understandings 

pertaining to the facility and its 

operation; records relating to the facility 

or its operation, wherever kept and in 

whatever form, and all other interests, 

assets, or improvements customarily 

used in the delivery of natural gas from 

the interconnection of the Texas Eastern 

Gas Transmission LP to the Linden 

Generating Station. 

To the extent that any licenses, 

permits, or authorizations described in 

Section IIE.a. or Section II.E.b. are 

nontransferable, Defendants will use 

their best efforts to obtain the necessary 

consent for assignment to the Acquirer 

or Acquirers of the license, permit, or 

authorization. 

F. ‘‘Exelon’’ means Exelon 

Corporation, a Pennsylvania corporation 

headquartered in Chicago, Illinois, its 

successors and assigns, and its 

subsidiaries, divisions, groups, 

affiliates, partnerships, joint ventures 

(not including Exelon’s participation in 

the ownership, operation, dispatch, or 

offering of output of the Keystone 

Generating Station or the Conemaugh 

Generating Station), and their directors, 

officers, managers, agents, and 

employees. 

G. ‘‘Exelon/PSEG Transaction’’ means 

the merger of Exelon and PSEG that is 

the subject of HSR Transaction 

Identification No. 2005–696, which was 

filed pursuant to the Hart-Scott-Rodino 

Antitrust Improvements Act of 1976, as 

amended, 15 U.S.C.A. 18a (West 1997) 

(‘‘HSR Act’’), including any changes in 

the terms of that merger that do not 

necessitate a new Hart-Scott-Rodino 

filing. 

H. ‘‘Good Utility Practice’’ means any 

of the practices, methods, and acts 

engaged in or approved by a significant 

portion of the electric utility industry 

during the relevant time period, or any 

of the practices, methods, and acts 

which, in the exercise of reasonable 

judgment in light of the facts known at 

the time the decision is made, could 

have been expected to accomplish the 

desired result at a reasonable cost 

consistent with good business practices, 

reliability, safety, and expedition. 

‘‘Good Utility Practice’’ is not intended 

to be limited to the optimum practice, 

method, or act to the exclusion of all 

others, but rather is intended to include 

acceptable practices, methods, or acts 

generally accepted in the region. 

I. ‘‘Including’’ means including but 

not limited to. 

J. ‘‘Person’’ means any natural person, 

corporation, association, firm, 

partnership, or other business or legal 

entity. 

K. ‘‘PJM’’ means PJM Interconnection, 

LLC. 

L. ‘‘PSEG’’ means Public Service 

Enterprise Group Incorporated, a New 

Jersey corporation headquartered in 

Newark, New Jersey, its successors and 

assigns, and its subsidiaries, divisions, 

groups, affiliates, partnerships, joint 

ventures (not including PSEG’s 

participation in the ownership, 

operation, dispatch, or offering of 

output of the Keystone Generating 

Station, the Conemaugh Generating 

Station, or the Yards Creek Generating 

Station), and their directors, officers, 

managers, agents, and employees. 

III. Applicability 

A. This Final Judgment applies to 

Defendants Exelon and PSEG, as 

defined above, and all other persons in 

active concert or participation with any 

of them who receive actual notice of this 

Final Judgment by personal service or 

otherwise. 

B. Defendants shall require, as a 

condition of the sale or other 

disposition of all or substantially all of 

their electricity generating facilities in 

the Designated Utility Zones or of lesser 

business units that include the 

Divestiture Assets, that the purchaser 

agrees to be bound by the provisions of 


sroberts on PROD1PC70 with NOTICES
49482 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 

this Final Judgment, provided, however, 

that Defendants need not obtain such an 

agreement from the Acquirers of the 

Divestiture Assets. 

IV. Divestitures 

A. Defendants are hereby ordered and 

directed, in accordance with the terms 

of this Final Judgment, to sell the 

Divestiture Assets to Acquirers 

acceptable to the United States in its 

sole discretion. Defendants shall enter 

into definitive contracts for sale of the 

Divestiture Assets within 150 days after 

consummation of the Exelon/PSEG 

Transaction. The United States, in its 

sole discretion, may extend the time 

period set forth in Section IV.A. for 

entering into definitive contracts for sale 

for an additional period not to exceed 

thirty (30) calendar days and shall 

notify the Court in such circumstances. 

Defendants shall use their best efforts as 

expeditiously and timely as possible (1) 

to enter into these contracts, and (2) 

after obtaining the United States’

approval of the Acquirers, to seek the 

necessary approvals of the sale of 

Divestiture Assets from regulatory 

agencies with jurisdiction over the 

Exelon/PSEG Transaction. Defendants 

shall consummate the contracts for sale 

no later than twenty-one (21) calendar 

days after receiving, for each Divestiture 

Asset, the last necessary regulatory 

approval required for that Divestiture 

Asset. 

B. In accomplishing the requirements 

imposed by Section IV.A., Defendants 

promptly shall make known, by usual 

and customary means, the availability 

for sale of the Divestiture Assets. 

Defendants shall inform any person 

making an inquiry regarding a possible 

purchase of the Divestiture Assets that 

the sales are being made pursuant to 

this Final Judgment and provide such 

person with a copy of this Final 

Judgment. Defendants shall also offer to 

furnish to prospective Acquirers who 

have been invited to submit binding 

bids, subject to reasonable protection for 

confidential commercial information, all 

information and documents relating to 

the Divestiture Assets customarily 

provided in a due diligence process, 

except such information subject to 

attorney-client privilege or the attorney 

work-product doctrine. Defendants shall 

make available such information to the 

United States at the same time that such 

information is made available to any 

other person. 

C. Subject to reasonable protection for 

confidential commercial information, 

Defendants shall permit prospective 

Acquirers who have been invited to 

submit binding bids for the Divestiture 

Assets to have reasonable access to their 

personnel and to make such inspection 

of the Divestiture Assets and any and all 

of their financial, operational, or other 

documents and information customarily 

provided as part of a due diligence 

process, as well as access to any and all 

environmental and other permit 

documents and information. 

D. Defendants shall provide to each 

Acquirer of any of the Divestiture 

Assets, and to the United States, the 

name and most recent contact 

information (if known) for each 

individual who is currently, or who, to 

the best of Defendants’ knowledge, has, 

at any time since January 1, 2006, been 

stationed at a specific Divestiture Asset 

and involved in the operation, dispatch, 

or offering of the output, of that 

Divestiture Asset to be purchased by the 

Acquirer. Defendants shall not impede 

or interfere with any negotiations by the 

Acquirer or Acquirers to employ such 

persons. 

E. Defendants also agree to preserve 

the Divestiture Assets in a condition 

and state of repair at least equal to their 

condition and state of repair as of the 

date the Complaint was filed, ordinary 

wear and tear excepted, and consistent 

with Good Utility Practice. 

F. Defendants shall warrant to the 

Acquirers of the Divestiture Assets that 

each asset (other than assets retired in 

place as of June 1, 2006) will be 

operational, consistent with Good 

Utility Practice, on the date of sale, 

subject to legal or regulatory restrictions 

on any of the Divestiture Assets in 

existence on the date of sale. 

G. Defendants shall warrant to the 

Acquirers of the Divestiture Assets that 

there are no undisclosed material 

defects in the environmental, zoning, or 

other permits pertaining to the 

operation of each asset, and that 

following the sale of the Divestiture 

Assets, Defendants will not undertake, 

directly or indirectly, any challenges to 

any permits or certifications relating to 

the operation of the Divestiture Assets, 

or otherwise take any action to impede 

the divestiture or operation of the 

Divestiture Assets. 

H. The divestitures, whether 

accomplished by Defendants pursuant 

to Section IV, or by the trustee 

appointed pursuant to Section V of this 

Final Judgment, shall be accomplished 

in such a way as to satisfy the United 

States, in its sole discretion, that the 

Divestiture Assets can and will be used 

by the Acquirers as part of viable, 

ongoing businesses engaged in the 

provision of electric generation services. 

The divestitures, whether pursuant to 

Sections IV or V of this Final Judgment, 

(1) shall be made to Acquirers that, in 

the United States’ sole judgment, have 

the intent and capability (including the 

necessary managerial, operational, 

technical, and financial capability) of 

competing effectively in the business of 

the provision of electric generation 

services; and (2) shall be accomplished 

so as to satisfy the United States, in its 

sole discretion, that none of the terms of 

any agreement between the Acquirers 

and Defendants give Defendants the 

ability unreasonably to raise the 

Acquirers’ costs, to lower the Acquirers’

efficiency, or otherwise to interfere in 

the ability of the Acquirers to compete 

effectively. 

V. Appointment of Trustee 

A. If Defendants have not entered into 

definitive contracts for sale of the 

Divestiture Assets within the time 

specified in Section IV.A. of this Final 

Judgment, Defendants shall notify the 

United States of that fact in writing. 

Upon application of the United States, 

the Court shall appoint a trustee 

selected by the United States and 

approved by the Court to effect the 

divestiture of the Divestiture Assets, 

including the application for necessary 

regulatory approvals. Until such time as 

a trustee is appointed, Defendants shall 

continue their efforts to effect the sale 

of the Divestiture Assets as specified in 

Section IV. 

B. After the appointment of a trustee 

becomes effective, only the trustee shall 

have the right to sell the Divestiture 

Assets. The trustee shall have the power 

and authority to accomplish the 

divestitures at the earliest possible time 

to Acquirers acceptable to the United 

States, in its sole discretion, at such 

price and on such terms as are then 

obtainable upon reasonable effort by the 

trustee, subject to the provisions of 

Sections IV, V, and VI of this Final 

Judgment, and shall have such other 

powers as the Court deems appropriate. 

Subject to Section V.D. of this Final 

Judgment, the trustee shall have the 

power and authority to hire at the cost 

and expense of Defendants any 

investment bankers, attorneys, or other 

agents, who shall be solely accountable 

to the trustee, reasonably necessary in 

the judgment of the trustee to assist in 

the divestitures. 

C. Defendants shall not object to a sale 

by the trustee on any ground other than 

the trustee’s malfeasance. Any such 

objections by Defendants must be 

conveyed in writing to the United States 

and the trustee within ten (10) calendar 

days after the trustee has provided the 

notice required under Section VI of this 

Final Judgment. 

D. The trustee shall serve at the cost 

and expense of Defendants, on such 

terms and conditions as the United 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 49483 

States approves, and shall account for 

all monies derived from the sale of the 

assets sold by the trustee and all costs 

and expenses so incurred. After 

approval by the Court of the trustee’s 

accounting, including fees for its 

services and those of any professionals 

and agents retained by the trustee, all 

remaining money shall be paid to 

Defendants, and the trust shall then be 

terminated. The compensation of the 

trustee and of any professionals and 

agents retained by the trustee shall be 

reasonable in light of the value of the 

Divestiture Assets and based on a fee 

arrangement providing the trustee with 

an incentive based on the price and 

terms of the divestitures and the speed 

with which they are accomplished, but 

timeliness is paramount. 

E. Defendants shall use their best 

efforts to assist the trustee in 

accomplishing the required divestiture, 

including their best efforts to effect all 

necessary regulatory approvals. The 

trustee and any consultants, 

accountants, attorneys, and other 

persons retained by the trustee shall 

have full and complete access to the 

personnel, books, records, and assets at 

the facilities to be divested, and 

Defendants shall develop financial or 

other information relevant to the assets 

to be divested customarily provided in 

a due diligence process as the trustee 

may reasonably request, subject to 

reasonable protection for confidential 

commercial information. Defendants 

shall permit prospective Acquirers who 

have been invited to submit binding 

bids for any of the Divestiture Assets to 

have reasonable access to their 

personnel and to make such inspection 

of the Divestiture Assets and any and all 

financial, operational, or other 

documents and other information as 

may be relevant to the divestitures 

required by this Final Judgment, subject 

to reasonable protection for confidential 

commercial information. Defendants 

shall take no action to interfere with or 

to impede the trustee’s accomplishment 

of the divestitures. 

F. After its appointment, the trustee 

shall file monthly reports with the 

United States and the Court setting forth 

the trustee’s efforts to accomplish the 

divestitures ordered under this Final 

Judgment; provided however, that to the 

extent such reports contain information 

that the trustee deems confidential, such 

reports shall not be filed in the public 

docket of the Court. Such reports shall 

include the name, address, and 

telephone number of each person who, 

during the preceding month, made an 

offer to acquire, expressed an interest in 

acquiring, entered into negotiations to 

acquire, or was contacted or made an 

inquiry about acquiring, any interest in 

the Divestiture Assets, and shall 

describe in detail each contact with any 

such person during that period. The 

trustee shall maintain full records of all 

efforts made to divest the Divestiture 

Assets. 

G. If the trustee has not accomplished 

such divestitures within sixty (60) 

calendar days after its appointment, the 

trustee shall file promptly with the 

Court a report setting forth (1) the 

trustee’s efforts to accomplish the 

required divestitures; (2) the reasons, in 

the trustee’s judgment, why the required 

divestitures have not been 

accomplished; and (3) the trustee’s 

recommendations. To the extent such 

reports contain information that the 

trustee deems confidential, such reports 

shall not be filed in the public docket 

of the Court. The trustee shall at the 

same time furnish such report to the 

United States, who shall have the right 

to make additional recommendations 

consistent with the purpose of the trust. 

The Court shall enter thereafter such 

orders as it shall deem appropriate to 

carry out the purpose of this Final 

Judgment which may, if necessary, 

include extending this Final Judgment 

and the term of the trustee’s 

appointment by a period requested by 

the United States. 

VI. Notice of Proposed Divestitures 

A. Within two (2) business days after 

signing a definitive contract for sale of 

any of the Divestiture Assets, 

Defendants or the trustee, whichever is 

then responsible for effecting the 

divestiture required herein, shall notify 

the United Stales of any proposed 

divestiture required by Sections IV or V 

of this Final Judgment, and submit to 

the United States a copy of the proposed 

contract for sale and any other 

agreements with the Acquirer relating to 

the Divestiture Assets. If the trustee is 

responsible, it shall similarly notify 

Defendants. The notice shall set forth 

the details of the proposed divestiture 

(including the name, address, and 

telephone number of the proposed 

Acquirer), and list the name, address, 

and telephone number of each person 

not previously identified who offered or 

expressed an interest in or desire to 

acquire the Divestiture Assets, together 

with full details of the same. 

B. Within fifteen (15) calendar days of 

receipt by the United States of such 

notice, the United States may request 

from Defendants, the proposed 

Acquirers, any other third party, or the 

trustee if applicable, additional 

information concerning the proposed 

divestiture, the proposed Acquirers, and 

any other potential Acquirers. 

Defendants and the trustee shall furnish 

any additional information requested 

within fifteen (15) calendar days of the 

receipt of the request, unless the parties 

shall otherwise agree. 

C. Within thirty (30) calendar days 

after receipt of the notice or within 

twenty (20) calendar days after the 

United States has been provided the 

additional information requested from 

Defendants, the proposed Acquirers, 

any third party, and the trustee, 

whichever is later, the United States 

shall provide written notice to 

Defendants and the trustee, if there is 

one, stating whether or not it objects to 

the proposed divestiture, provided, 

however, that the United States may 

extend the period for its review up to an 

additional thirty (30) calendar days. If 

the United States provides written 

notice that it does not object, the 

divestiture may be consummated, 

subject only to Defendants’ limited right 

to object to the sale under Section V.C. 

of this Final Judgment. Absent written 

notice that the United States does not 

object to the proposed Acquirer, or upon 

objection by the United States, a 

divestiture proposed under Section IV 

or Section V shall not be consummated. 

Upon objection by Defendants under 

Section V.C., a divestiture proposed 

under Section V shall not be 

consummated unless approved by the 

Court. 

VII. Affidavits 

A. Within twenty (20) calendar days 

of the filing of the Complaint in this 

matter and every thirty (30) calendar 

days thereafter until the Divestiture 

Assets have been sold, whether 

pursuant to Sections IV or V of this 

Final Judgment, Defendants shall 

deliver to the United States an affidavit 

as to the fact and manner of compliance 

with Sections IV or V of this Final 

Judgment. Each such affidavit shall 

include the name, address, and 

telephone number of each person who, 

during the preceding thirty days, made 

an offer to acquire, expressed an interest 

in acquiring, entered into negotiations 

to acquire, or was contacted or made an 

inquiry about acquiring, any interest in 

the Divestiture Assets, and shall 

describe in detail each contact with any 

such person during that period. Each 

such affidavit shall also include a 

description of the efforts that 

Defendants have taken to solicit 

purchasers for the Divestiture Assets 

and to provide required information to 

prospective purchasers including the 

limitations, if any, on such information. 

Assuming the information set forth in 

the affidavit is true and complete, any 

objection by the United States to 


sroberts on PROD1PC70 with NOTICES
49484 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 

information provided by Defendants, 

including limitation on information, 

shall be made within fourteen (14) 

calendar days of receipt of such 

affidavit. 

B. Within twenty (20) calendar days 

of the filing of the Complaint in this 

matter, Defendants shall deliver to the 

United States an affidavit that describes 

in detail all actions Defendants have 

taken and all steps Defendants have 

implemented on an ongoing basis to 

comply with Section IX of this Final 

Judgment. The affidavit also shall 

include a description of Defendants’

efforts to maintain the Divestiture 

Assets in operable condition at no less 

than current capacity configurations 

with current levels of staffing and 

management and to otherwise comply 

with the Hold Separate Stipulation and 

Order. Defendants shall deliver to the 

United States an affidavit describing any 

changes to the efforts and actions 

outlined in Defendants’ earlier 

affidavit(s) filed pursuant to this Section 

within fifteen (15) calendar days after 

the change is implemented. 

C. Defendants shall keep all records of 

all efforts made to preserve and divest 

the Divestiture Assets until one year 

after such divestitures have been 

completed. 

VIII. Financing 

Defendants shall not finance all or 

any part of any purchase made pursuant 

to Sections IV or V of this Final 

Judgment. 

IX. Hold Separate 

Until the divestitures required by this 

Final Judgment have been 

accomplished, Defendants shall take all 

steps necessary to comply with the Hold 

Separate Stipulation and Order entered 

by the Court. Defendants shall take no 

action that would jeopardize, delay, or 

impede the divestiture order by the 

Court. 

X. No Reacquisition 

Defendants may not acquire or control 

any of the Divestiture Assets during the 

term of this Final Judgment. 

XI. Prior Approval 

A . Without the prior approval of the 

United States, Defendants shall not 

acquire any electricity generating 

facility, or enter into any contract to 

obtain control of, an electricity 

generating facility or of one or more 

units of an electricity generating facility 

in the Designated Utility Zones, which 

facility or units are in existence as of 

June I, 2006, or are listed in Attachment 

A. Such prior approval shall be within 

the sole discretion of the United States. 

This prior approval requirement shall 

not apply to: 

1. Upgrades, expansions, or uprates of 

existing units up to the amount of such 

upgrades, expansions, or uprates; 

2. Units that are rebuilt, repowered, or 

activated out of inactive status after June 

1, 2006, as long as such rebuild, 

repowering, or activation, if done by 

Defendants, begins within one year of 

purchase of the facility that includes the 

unit; and 

3. Acquisitions of a facility of 25 

megawatts or less of summer net 

capability, as defined by PJM, or 

contracts to control 25 megawatts or less 

of summer net capability, as defined by 

PJM, provided, however, that 

Defendants do not acquire, or enter into 

contracts to obtain control of, more than 

100 megawatts of summer net capability 

from units at a single facility during a 

single calendar year. For the purpose of 

Section XI.A.3., the summer net 

capability of a unit that is an 

intermittent capacity resource, as 

defined by PJM, will be measured as of 

the date of acquisition of the unit, or of 

entry into the contract to control the 

unit, in accordance with the 

methodology used by PJM for 

calculating capacity values for 

intermittent capacity resources. 

B. Unless a transaction subject to 

Section XI.A. is otherwise subject to the 

reporting and waiting period 

requirements of the HSR Act: 

1. Defendants shall provide 

notification to the United States within 

five (5) calendar days of acceptance of 

any contract subject to Section XI.A. 

and shall submit copies of the contracts 

and any management or strategic plans 

discussing the proposed transaction, 

and the names of the principal 

representatives of the parties to the 

agreement who negotiated the 

agreement. Defendants shall send the 

required materials to Chief, 

Transportation, Energy, and Agriculture 

Section, Antitrust Division, United 

States Department of Justice, 325 

Seventh Street, NW., Suite 500, 

Washington, DC 20530. Should 

oversight of this Final Judgment be the 

responsibility of another section of the 

Antitrust Division, the required 

materials shall be sent to the chief of the 

section responsible for oversight of this 

Final Judgment; 

2. Within thirty (30) calendar days of 

the receipt of the required materials, if 

the transaction is not reportable under 

the HSR Act, the United States will 

determine whether it requires additional 

information from the parties to the 

contract. If the United States makes 

such a request for additional 

information, the parties will provide the 

information requested. 

C. Once the parties have provided all 

of the information requested under 

Section XIB. or under the HSR Act, the 

United States must notify Defendants 

within thirty (30) calendar days if the 

United States disapproves the proposed 

transaction. 

D. Section XI.A. shall be broadly 

construed and any ambiguity or 

uncertainty shall be resolved in favor of 

requiring prior approval. 

E. Nothing in this Section limits 

Defendants’ responsibility to comply 

with the requirements of the HSR Act 

with respect to any acquisition. 

XII. Compliance Inspection 

For purposes of determining or 

securing compliance with this Final 

Judgment, or of determining whether 

this Final Judgment should be modified 

or vacated, and subject to any legally 

recognized privilege, from time to time 

duly authorized representatives of the 

United States Department of Justice, 

including consultants and other persons 

retained by the United States, shall, 

upon written request of a duly 

authorized representative of the 

Assistant Attorney General in charge of 

the Antitrust Division, and on 

reasonable notice to Defendants, be 

permitted: 

1. Access during Defendants’ office 

hours to inspect and copy, or at the 

United States’ option, to require 

Defendants to provide copies of, all 

books, ledgers, accounts, records, and 

documents in the possession, custody, 

or control of Defendants, relating to any 

matters contained in this Final 

Judgment; and 

2. To interview, either informally or 

on the record, Defendants’ officers, 

employees, or agents, who may have 

their individual counsel present, 

regarding such matters. The interviews 

shall be subject to the reasonable 

convenience of the interviewee and 

without restraint or interference by 

Defendants. 

B. Upon the written request of a duly 

authorized representative of the 

Assistant Attorney General in charge of 

the Antitrust Division, Defendants shall 

submit written reports, or responses to 

written interrogatories, under oath if 

requested, relating to any of the matters 

contained in this Final Judgment as may 

be requested. 

C. No information or documents 

obtained by the means provided in this 

section shall be divulged by the United 

States to any person other than an 

authorized representative of the 

executive branch of the United States, 

except in the course of legal proceedings 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 49485 

to which the United States is a party 

(including grand jury proceedings), or 

for the purpose of securing compliance 

with this Final Judgment, or as 

otherwise required by law. 

If at the time information or 

documents are furnished by Defendants 

to the United States, Defendants 

represent and identify in writing the 

material in any such information or 

documents to which a claim of 

protection may be asserted under Rule 

26(c)(7) of the Federal Rules of Civil 

Procedure, and Defendants mark each 

pertinent page of such material, 

‘‘Subject to claim of protection under 

Rule 26(c)(7) of the Federal Rules of 

Civil Procedure,’’ then the United States 

shall give Defendants ten (10) calendar 

days notice prior to divulging such 

material in any legal proceeding (other 

than a grand jury proceeding). 

XIII. Retention of Jurisdiction 

The Court retains jurisdiction to 

enable any party to this Final Judgment 

to apply to the Court at any time for 

further orders and directions as may be 

necessary or appropriate to carry out or 

construe this Final Judgment, to modify 

any of its provisions, to enforce 

compliance, and to punish violations of 

its provisions. 

XIV. Expiration of Final Judgment 

Unless the Court grants an extension, 

this Final Judgment shall expire ten (10) 

years from the date of its entry. 

XV. Public Interest Determination 

Based on the record in this case, entry 

of this Final Judgment is in the public 

interest, and the parties have complied 

with the procedures of the Antitrust 

Procedures and Penalties Act, 15 U.S.C. 

16. 

Dated: lllllllllllllllll

lllllllllllllllllllll

United States District Judge 

ATTACHMENT A 

State Identification number 

PJM Queue, www.pjm.com Substation 

DE ................................... Q42 ................................................................................................................................ Indian River. 

NJ ................................... P23 ................................................................................................................................ Bayonne 138 kV. 

NJ ................................... Q08 ................................................................................................................................ Red Oak 230 kV. 

NJ ................................... Q11 ................................................................................................................................ Red Oak 230 kV. 

NJ ................................... Q26 ................................................................................................................................ Churchtown 230 kV. 

NJ ................................... Q41 ................................................................................................................................ Mt. Hope Mine 34.5 kV. 

PA ................................... CO2 ............................................................................................................................... South Lebanon 230 kV. 

PA ................................... G06 ................................................................................................................................ Martins Creek #4. 

PA ................................... M11 ............................................................................................................................... Susquehanna #1. 

PA ................................... M12 ............................................................................................................................... Susquehanna #2. 

PA ................................... P04 ................................................................................................................................ Peach Bottom 500 kV. 

PA ................................... Q20 ................................................................................................................................ Holtwood. 

PA ................................... Q28 ................................................................................................................................ Eldred-Frackville 230kV. 

United States District Court for the 

District of Columbia 

United States of America, Plaintiff; v. 

Exelon Corporation and Public Service 

Enterprise Group Incorporated, 

Defendants 

Case No. 1:06CV01138 

Judge: John D. Bates 

Deck Type: Antitrust 

Filed: August 10, 2006 

Competitive Impact Statement 

The United States, pursuant to 

Section 2(b) of the Antitrust Procedures 

and Penalties Act (’’APPA’’ or ‘‘Tunney 

Act’’), 15 U.S.C. 16(b)–(h), files this 

Competitive Impact Statement relating 

to the proposed Final Judgment 

submitted for entry in this civil antitrust 

proceeding. 

I. Nature and Purpose of the Proceeding 

On December 20, 2004, Defendants 

entered into an Agreement and Plan of 

Merger under which Exelon Corporation 

(‘‘Exelon’’) would merge with Public 

Service Enterprise Group Incorporated 

(‘‘PSEG’’). On June 22, 2006, the United 

States filed a civil antitrust Complaint 

seeking to enjoin the proposed merger. 

The Complaint alleges that the merger 

likely would lessen competition 

substantially for wholesale electricity in 

sections of the United States in violation 

of Section 7 of the Clayton Act, 15 

U.S.C. 18. This loss of competition 

would result in increased wholesale 

electricity prices, raising retail 

electricity prices for millions of 

residential, commercial, and industrial 

customers in parts of the Mid-Atlantic 

states. 

At the same time the Complaint was 

filed, the United States filed a Hold 

Separate Stipulation and Order 

(‘‘Stipulation’’) and proposed Final 

Judgment that are designed to eliminate 

the anti competitive effects of the 

merger. Under the proposed Final 

Judgment, as explained more fully 

below, Defendants are required to divest 

six electric generating plants 

(collectively the ‘‘Divestiture Assets’’). 

The Stipulation and proposed Final 

Judgment require Defendants to take 

certain steps to ensure that these assets 

are preserved and maintained and that 

competition is maintained during the 

pendency of the ordered divestiture. 

The United States and Defendants 

have stipulated that the proposed Final 

Judgment may be entered after 

compliance with the APPA. Entry of the 

proposed Final Judgment would 

terminate this action, except that the 

Court would retain jurisdiction to 

construe, modify, or enforce the 

provisions of the proposed Final 

Judgment and to punish violations of it. 

Defendants have also stipulated that 

they will comply with the terms of the 

Stipulation and the proposed Final 

Judgment from the date of the signing of 

the Stipulation, pending entry of the 

proposed Final Judgment by the Court 

and the required divestiture. Should the 

Court decline to enter the proposed 

Final Judgment, Defendants have also 

committed to abide by its requirements 

and those of the Stipulation until the 

expiration of the time for appeal. 

II. Description of the Events Giving Rise 

to the Alleged Violation 

A. The Defendants and the Proposed 

Transaction 

Defendant Exelon is a Pennsylvania 

corporation, with its headquarters in 

Chicago, Illinois; it owns Exelon 

Generation Company, LLC, which owns 

electric generating plants located 

primarily in the Mid-Atlantic and the 

Midwest with a total generating capacity 

of more than 25,000 megawatts (‘‘MW’’). 

Defendant PSEG is a New Jersey 

corporation, with its headquarters in 


sroberts on PROD1PC70 with NOTICES
49486 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 

Newark, New Jersey; it owns PSEG 

Power LLC, which owns electric 

generating plants located primarily in 

New Jersey with a total generating 

capacity of more than 15,000 MW. By 

combining the generating plants owned 

by Exelon and PSEG, the proposed 

merger would enhance the ability and 

incentive of the merged firm to reduce 

output and raise prices for wholesale 

electricity in two areas of the MidAtlantic where Defendants are the 

largest generators of electricity. Thus, 

the transaction as originally proposed 

would lessen competition substantially 

in violation of Section 7 of the Clayton 

Act, 15 U.S.C. 18. 

B. Wholesale Electricity in the MidAtlantic 

Electricity supplied to retail 

customers is generated at electric 

generating plants, which consist of one 

or more generating units. An individual 

generating unit uses anyone of several 

types of generating technologies 

(including hydroelectric turbine, steam 

turbine, combustion turbine, or 

combined cycle) to transform the energy 

in fuels or the force of flowing water 

into electricity. The generating units 

typically are fueled by uranium, coal, 

oil, or natural gas. 

Generating units vary considerably in 

their operating costs, which are 

determined primarily by the cost of fuel 

and the efficiency of the unit’s 

technology in transforming the energy 

in fuel into electricity. ‘‘Baseload’’

units—which typically include nuclear 

and some coal-fired steam turbine 

units— have relatively low operating 

costs. ‘‘Peaking’’ units—which typically 

include oil- and gas-fired combustion 

turbine units—have relatively high 

operating costs. ‘‘Mid-merit’’ units 

which typically include combined cycle 

and some coal-fired steam turbine 

units—have costs lower than those of 

peaking units but higher than those of 

baseload units. 

Once electricity is generated at a 

plant, an extensive set of interconnected 

high-voltage lines and equipment, 

known as the transmission grid, 

transports the electricity to lower 

voltage distribution lines that relay the 

power to homes and businesses. 

Transmission grid operators must 

closely monitor the grid to prevent too 

little or too much electricity from 

following over the grid, either of which 

might damage lines or generating units 

connected to the grid. To prevent such 

damage and to prevent widespread 

blackouts from disrupting electricity 

service, a grid operator will manage the 

grid to prevent any more electricity from 

flowing over a transmission line as that 

line approaches its operating limit (a 

‘‘transmission constraint’’). 

In the Mid-Atlantic, the transmission 

grid is overseen by PJM Interconnection, 

LLC (‘‘PJM’’), a private, non-profit 

organization whose members include 

transmission line owners, generation 

owners, distribution companies, retail 

customers, and wholesale and retail 

electricity suppliers. The transmission 

grid administered by PJM is the largest 

in the United States, providing 

electricity to approximately 51 million 

people in an area encompassing all or 

parts of New Jersey, Pennsylvania, 

Delaware, Maryland, Virginia, West 

Virginia, the District of Columbia, North 

Carolina, Kentucky, Ohio, Indiana, 

Michigan, Tennessee, and Illinois (the 

PJM control area’’). 

PJM oversees two auctions for the sale 

and purchase of wholesale electricity: A 

day-ahead auction that clears the day 

before electricity is to be generated and 

delivered, and a real-time auction that 

clears the day electricity is delivered. In 

these auctions, generation owners 

located in the PJM control area submit 

offers to sell electricity and electricity 

retailers submit bids to purchase 

electricity. Buyers submit bids that 

indicate the amount of electricity they 

are willing to buy at different prices. 

Sellers submit offers that indicate the 

amount of electricity they are willing to 

sell at different prices. PJM adds up the 

bids and offers to determine the total 

demand and supply for electricity. The 

amount of electricity that actually is 

generated and delivered is determined 

by the PJM auctions. Buyers and sellers 

of wholesale electricity may also enter 

into contracts with each other or with 

third parties, outside of the PJM auction 

process; the prices of these contracts 

generally reflect expected auction 

prices. 

Subject to the physical and 

engineering limitations of the 

transmission grid, PJM seeks to have 

generating units operated in ‘‘merit’’

order, from lowest to highest offer. In 

the day-ahead auction, as long as 

transmission constraints are not 

expected, PJM takes the least expensive 

offer first and then continues to accept 

offers to sell at progressively higher 

prices until the needs for each hour of 

the next day are covered. In this way, 

PJM minimizes the total cost of 

generating electricity required for the 

next day. The clearing price for any 

given hour essentially is determined by 

the generating unit with the highest 

offer price that is needed for that hour, 

and all sellers for that hour receive that 

price regardless of their offer price or 

their units’ costs. In the real-time 

auction, which accounts for differences 

between anticipated and actual supply 

and demand, PJM also accepts sellers’

offers in merit order until there is a 

sufficient quantity of electricity to meet 

actual demand, subject to the physical 

and engineering limitations of the 

transmission grid. 

At times, transmission constraints 

prevent the generating units with the 

lowest offers from meeting demand in a 

particular area within the PJM control 

area. When that happens, PJM often 

calls on more expensive units located 

within the smaller area bounded by the 

transmission constraints (a ‘‘constrained 

area), and the clearing price for the 

buyers in that area adjusts accordingly. 

Because more expensive units are 

required to meet demand, the clearing 

price in a constrained area will be 

higher than it would be absent the 

transmission constraints. 

PJM East. One historically constrained 

area within the PJM control area 

includes the densely populated 

northern New Jersey and Philadelphia 

areas. This area, referred to in the 

Complaint as ‘‘PJM East,’’ is defined by 

the ‘‘Eastern Interface,’’ a set of five 

major transmission lines that divides 

New Jersey and the Philadelphia area 

from the rest of the PJM control area. 

When the Eastern Interface is 

constrained, PJM is limited in its ability 

to meet demand located east of the 

constraint with electricity from 

generating units located west of the 

constraint. PJM often responds to 

constraints on the Eastern Interface by 

calling on additional generating units 

east of the constraint to run, generally 

resulting in higher prices in PJM East 

than otherwise would exist because the 

cost of additional generation east of the 

constraint is higher than the cost of 

additional generation west of the 

constraint. 

PJM Central/East. A second 

constrained area in PJM includes PJM 

East, central Pennsylvania, and eastern 

Maryland. This area is defined by two 

major transmission lines known as 

‘‘5004’’ and ‘‘5005’’ that run from 

western to central Pennsylvania and 

divide central Pennsylvania, eastern 

Maryland, and PJM East (‘‘PJM Central/ 

East’’) from the rest of PJM. When the 

5004 and 5005 transmission lines are 

constrained, PJM is limited in its ability 

to supply demand located east of the 

constraint with electricity from 

generating units located west of the 

constraint. PJM often responds to 

constraints on the 5004 and 5005 lines 

by calling on additional generating units 

east of the constraint to run, generally 

resulting in higher prices in PJM 

Central/East than otherwise would exist 

because the cost of additional 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 49487 

1See U.S. Department of Justice and Federal 

Trade Commission, Horizontal Merger Guidelines 

§ 1.51 (April 2, 1992) available at http:// 

www.usdoj.gov/atr/public/guidelines/hmg.htm. 

generation east of the constraint is 

higher than the cost of additional 

generation west of the constraint. 

C. Product Market 

The Complaint alleges that wholesale 

electricity, electricity that is generated 

and sold for resale, is a relevant 

antitrust product market. Wholesale 

electricity demand is a function of retail 

electricity demand: Electricity retailers, 

who buy wholesale electricity to serve 

their customers, must provide exactly 

the amount of electricity their customers 

require. Retail electricity consumers’

demand, however, is largely insensitive 

to changes in retail price; thus, an 

increase in retail prices due to an 

increase in wholesale prices will have 

little effect on the quantity of retail 

electricity demanded and little effect on 

the quantity of wholesale electricity 

demanded. As a result, a small but 

significant increase in the wholesale 

price of electricity would not cause a 

significant number of retail electricity 

consumers to substitute other energy 

sources for electricity or otherwise 

reduce their consumption of electricity. 

D. Geographic Markets 

The Complaint alleges that ‘‘PJM 

East’’ and ‘‘PJM Central/East’’ are 

relevant antitrust geographic markets 

defined by transmission lines in the PJM 

control area: PJM East is defined by the 

Eastern Interface, and PJM Central/East 

is defined by the 5004 and 5005 

transmission lines. When these lines 

approach their operating limits, 

purchasers of electricity have limited 

ability to purchase electricity generated 

outside the relevant geographic market 

to meet their needs. At such times, the 

amount of electricity that could be 

purchased outside PJM East or PJM 

Central/East is insufficient to make it 

unprofitable for generators located 

inside those areas to make a small but 

significant price increase. Thus, PJM 

East and PJM Central/East are relevant 

antitrust geographic markets. 

E. The Competitive Effects of the 

Transaction on Wholesale Electricity 

The Complaint alleges that Exelon’s 

proposed merger with PSEG would 

eliminate competition between them 

and give the merged firm the incentive 

and ability profitably to raise wholesale 

electricity prices, resulting in increased 

retail prices for millions of residential, 

commercial, and industrial customers in 

PJM East and PJM Central/East. In PJM 

East during 2005, more than $10 billion 

of wholesale electricity was sold for 

resale to nearly 6 million retail 

customers; in PJM Central/East during 

2005, more than $19 billion of 

wholesale electricity was sold for resale 

to nearly 9 million retail customers. In 

PJM East and PJM Central/East, the 

merged firm would own a substantial 

share of total generating capacity in 

highly concentrated markets. More 

importantly, in both geographic markets 

the merged firm would own low-cost 

baseload units that provide incentive to 

raise prices, mid-merit units that 

provide incentive and ability to raise 

prices, and certain peaking units that 

provide additional ability to raise prices 

in times of high demand. 

Market shares in PJM East and PJM 

Central/East. In PJM East, Exelon 

currently owns approximately 20 

percent of the generating capacity and 

PSEG currently owns approximately 29 

percent of the generating capacity. After 

the merger, Exelon would own 

approximately 49 percent of the total 

generating capacity in PJM East. In PJM 

Central/East, Exelon currently owns 

approximately 19 percent of the 

generating capacity and PSEG currently 

owns approximately 21 percent of the 

generating capacity. After the merger, 

Exelon would own approximately 40 

percent of the total generating capacity 

in PJM Central/East. 

Concentration in PJM East and PJM 

Central/East. The U.S. Department of 

Justice and the Federal Trade 

Commission’s 1992 Horizontal Merger 

Guidelines consider markets in which 

the post-merger Herfindahl-Hirschman 

Index (‘‘HHI’’), a measure of 

concentration explained in Appendix A 

of the Complaint, exceeds 1800 points 

to be highly concentrated. Transactions 

that increase the HHI by more than 100 

points in highly concentrated markets 

presumptively raise significant antitrust 

concerns under the Horizontal Merger 

Guidelines.1 Exelon’s merger with PSEG 

would yield a post-merger HHI in PJM 

East of approximately 2750 points, 

representing an increase of more than 

1100 points. Exelon’s merger with PSEG 

would yield a post-merger HHI in PJM 

Central/East of approximately 2080 

points, representing an increase of 

approximately 790 points. Thus, the 

proposed merger raises a presumption 

of significant antitrust concerns in PJM 

East and PJM Central/East. 

Increased ability and incentive 

profitably to withhold output and raise 

prices. The Complaint alleges that the 

proposed merger would substantially 

lessen competition. The combination of 

PSEG and Exelon’s generating units 

would increase the merged firm’s ability 

and incentive to withhold selected 

output, forcing PJM to turn to more 

expensive units to meet demand, 

resulting in higher clearing prices in 

PJM East and PJM Central/East. 

Baseload units, such as nuclear steam 

and some hydroelectric units, typically 

generate electricity around the clock 

during most of the year; certain lowercost mid-merit units, including some 

coal-fired steam units, generate 

electricity for a substantial number of 

hours during the year. When they are 

running, such baseload and mid-merit 

units are positioned to benefit from an 

increase in wholesale electricity prices. 

Because they run so frequently, these 

units provide a relatively significant 

incentive to withhold output and raise 

prices. 

Mid-merit units also provide 

substantial ability to withhold output to 

increase the market clearing price. Midmerit units have costs that are close to 

clearing prices for a substantial number 

of hours during the year. Because their 

costs are so close to clearing prices, the 

opportunity cost of withholding output 

from these units—the lost profit on the 

withheld output—is smaller than it 

would be for low-cost base load units. 

This fact is also true of certain peaking 

units during times of the year when 

demand is higher. 

By giving the merged firm an 

increased amount of baseload and midmerit capacity, combined with an 

increased share of mid-merit and 

peaking capacity, the merger 

substantially increases the likelihood 

that Exelon would find it profitable to 

withhold output and raise price. With 

its increased share of mid-merit and 

peaking capacity, the merged firm 

would more often be able to reduce 

output and raise market clearing prices 

at relatively low cost to it. And with its 

increased amount of baseload and midmerit capacity, the merger would make 

it more likely that the increased revenue 

on the merged firm’s baseload and midmerit capacity would outweigh the cost 

of withholding its higher-cost mid-merit 

and peaking capacity. Thus the merger 

facilitates Exelon’s incentive and ability 

to reduce output and raise market 

prices. 

F. Entry 

The Complaint alleges that entry 

through the construction of new 

generation or transmission capacity 

would not be timely, likely, and 

sufficient to deter or counteract an anti 

competitive price increase. Given the 

necessary environmental, safety, and 

zoning approvals required, it would take 

many years for such new entry to take 

place. Thus, entry via new generation or 


sroberts on PROD1PC70 with NOTICES
49488 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 

2C.f. U.S. Department of Justice, Antitrust 

Division Policy Guide to Merger Remedies § II 

(October 2004), available at http://www.usdoj.gov/ 

atr/public/guidelines/205108.htm (‘‘Restoring 

competition requires replacing the competitive 

intensity lost as a result of the merger rather than 

focusing narrowly on returning to premerger HHI 

levels’’). 

3Post divestiture, Exelon will retain a significant 

amount of low-cost, baseload nuclear capacity. 

Although this capacity may provide Exelon with 

incentive to exercise market power by withholding 

output, the divestiture called for by the proposed 

Final Judgment substantially limits Exelon’s ability 

to withhold output. Moreover, it is not likely that 

Exelon will withhold output from nuclear units 

given the large opportunity cost—the lost profit on 

withheld nuclear output—of withholding. 

transmission capacity would, at a 

minimum, not be timely. 

III. Explanation of the Proposed Final 

Judgment 

The proposed Final Judgment would 

preserve the competition that would 

have been lost in PJM East and PJM 

Central/East had Exelon’s merger with 

PSEG gone forward as proposed. Within 

150 days after consummation of their 

merger, Defendants must sell all of their 

rights, titles, and interests in the 

Divestiture Assets. The assets and 

interests will be sold to purchasers 

acceptable to the United States in its 

sole discretion. In addition, the Final 

Judgment prohibits the merged 

company from reacquiring or 

controlling any of the Divestiture 

Assets, as well as limits its ability to 

acquire, or enter into contracts to 

control, generating units in PJM East or 

PJM Central/East. 

A. Divestiture 

The Complaint alleges that the merger 

would significantly enhance the merged 

firm’s ability and incentive profitably to 

reduce output and raise prices in PJM 

East and PJM Central/East. The 

divestiture requirements of the 

proposed Final Judgment will maintain 

competition for wholesale energy in 

these geographic markets by allowing 

independent competitors to acquire the 

Divestiture Assets. The Divestiture 

Assets are six generating plants located 

inPJ East and PJM Central/East that 

comprise mid-merit and peaking units: 

• Cromby Generating Station, 100 

Cromby Rd. at Phoenixville, PA 19460; 

• Eddystone Generating Station, 

Number 1 Industrial Hwy. at Eddystone, 

PA 19022; 

• Hudson Generating Station, 

Duffield & Van Keuren Aves. at Jersey 

City, NJ 07306; 

• Linden Generating Station, 4001 

South Wood Ave. at Linden, NJ 07036; 

• Mercer Generating Station, 2512 

Lamberton Rd. at Hamilton, NJ 08611; 

and 

• Sewaren Generating Station, 751 

Cliff Rd. at Sewaren, NJ 07077. 

The Divestiture Assets include all of 

the merged firm’s coal-fired steam units 

in PJM East and PJM Central/East 

(located at the Eddystone, Cromby, 

Hudson, and Mercer plants); one of the 

merged firm’s two combined cycle units 

(located at the Linden plant); and 

several efficient peaking units (located 

at the Eddystone, Cromby, Linden, 

Hudson, and Sewaren plants). 

Effect of divestiture on market shares 

and concentration. Divestiture of these 

plants will reduce market shares and 

concentration substantially relative to 

what they would have been absent 

divestiture. Absent divestiture, the 

merged finn’s share of capacity would 

be approximately 49 percent in PJM East 

and 40 percent in PJM Central/East. 

With divestiture, the merged firm’s 

share of capacity will be approximately 

32 percent in PJM East and 29 percent 

in PJM Central/East. 

The pre-merger HHI concentration 

levels for PJM East and Central East are 

approximately 1590 points and 1290 

points, respectively. Absent divestiture, 

the post-merger HHIs would increase to 

highly concentrated levels of 

approximately 2750 points and 2080 

points, respectively. The divestiture, 

however, significantly reduces these 

levels. 

Effect of divestiture on ability and 

incentive profitably to withhold output 

and raise prices. Although the 

divestiture will substantially reduce 

market shares and concentration levels 

compared to the levels that would have 

prevailed absent divestiture, the 

purpose of the divestiture is to preserve 

competition, not merely maintain HHIs 

or market shares at their premerger 

levels.2 Accordingly, the proposed Final 

Judgment seeks to restore effective 

competition by depriving Exelon of key 

assets that would have made it 

profitable for it to withhold output and 

raise prices in PJM East and PJM 

Central/East. Divestiture of the six 

generating plants deprives the merged 

firm of key generating plants whose 

output it would otherwise have had the 

ability profitably to withhold. At the 

same time, the divestiture reduces the 

incentive the merged firm otherwise 

would have had to withhold output. In 

this way, the proposed Final Judgment 

assures that the merger is not likely to 

lead to consumer harm. 

The proposed Final Judgment requires 

divestiture of generating units that 

would have significantly enhanced the 

merged firm’s ability profitably to 

withhold output. These units include all 

of the merged firm’s coal-fired steam 

units in PJM East and PJM Central/East 

(located at the Eddystone, Cromby, 

Hudson, and Sewaren plants); one of the 

merged firm’s two combined cycle units 

(located at the Linden plant); and 

several efficient peaking units (located 

at the Eddystone, Cromby, Linden, 

Hudson, and Sewaren plants). Because 

their operating costs are relatively close 

to clearing prices for a substantial 

number of hours during the year, the 

opportunity cost of withholding output 

from these units—the lost profit on 

withheld output from them—is 

relatively small. Without these units, 

Exelon will be left with few assets in 

PJM East and PJM Central/East that 

operate close to clearing prices for a 

substantial number of hours of the year. 

This will increase significantly the 

opportunity cost of withholding output 

and make it less likely to be profitable. 

Thus the divestiture will substantially 

limit the ability of the merged firm 

profitably to withhold output and 

thereby raise prices. 

The divestiture will also reduce the 

merged firm’s incentive to withhold 

output and raise prices.3 Certain of the 

divested assets—the coal-fired steam 

and combined cycle units—have 

operating costs that are below the 

market clearing price for a substantial 

portion of the year and which therefore 

are frequently in a position to benefit 

from an increase in the market clearing 

price. Divestiture of these units will 

reduce the potential gains to the merged 

firm of withholding output and thus 

reduce the incentive of the merged firm 

to withhold output in the first place. 

Requirements regarding divestiture. 

Defendants must take all reasonable 

steps necessary to accomplish the 

divestiture quickly and shall cooperate 

with prospective purchasers. 

Defendants must also provide acquirers 

information relating to personnel that 

are or have been involved, at any time 

since January 1, 2006, in the operation 

of, or provision of generation services 

by, the Divestiture Assets. Defendants 

further must refrain from interfering 

with any negotiations by the acquirer or 

acquirers to employ any of the 

personnel that are or have been 

involved in the operation of any of the 

Divestiture Assets. Moreover, the 

proposed Final Judgment restricts 

Defendants from reacquiring any of the 

Divestiture Assets during the term of the 

proposed Final Judgment. Finally, the 

proposed Final Judgment requires that 

Defendants, with certain exceptions, 

obtain advance approval from the 

Department of Justice, for the entire 

duration of the Final Judgment, to 

acquire or enter into contracts to control 

any generating plants within the utility 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 49489 

4 In 2004, Congress amended the APPA to ensure 

that courts take into account the above-quoted list 

Continued 

zones within PJM East or PJM Central/ 

East. 

B. Use of a Divestiture Trustee 

In the event that Defendants do not 

accomplish the divestiture within the 

periods prescribed in the proposed 

Final Judgment, the proposed Final 

Judgment provides that the Court will 

appoint a trustee selected by the United 

States to effect the divestiture. If a 

trustee is appointed, the proposed Final 

Judgment provides that Defendants will 

pay all the costs and expenses of the 

trustee. The trustee’s commission will 

be structured so as to provide an 

incentive for the trustee based on the 

price obtained and the speed with 

which the divestiture is accomplished. 

After his or her appointment becomes 

effective, the trustee will file monthly 

reports with the Court and the United 

States setting forth his or her efforts to 

accomplish the divestiture. At the end 

of sixty (60) days, if the divestiture has 

not been accomplished, the trustee and 

the United States will make 

recommendations to the Court, which 

shall enter such orders as appropriate to 

carry out the purpose of the trust, 

including extending the trust or the 

term of the trustee’s appointment. 

IV. Explanation of the Hold Separate 

Stipulation and Order 

The Stipulation entered into by the 

United States and Defendants ensures 

that the Divestiture assets are preserved 

and maintained and that competition is 

maintained during the pendency of the 

ordered divestiture. First, the 

Stipulation includes terms requiring 

that Defendants maintain the Divestiture 

Assets as economically viable and 

competitive facilities. Second, the 

Stipulation includes terms ensuring that 

Defendants do not withhold output from 

the wholesale electricity market. In 

particular, the Stipulation requires that 

Defendants offer the output from certain 

generating units that they continue to 

own after consummation for sale into 

the PJM auctions at no more than 

specified price levels until the 

Divestiture Assets are sold. The 

Stipulation also calls for appointment of 

an auditor to ensure that Defendants 

offer their units at no more than the 

specified price levels and that they do 

not withhold the output of generating 

units to raise prices. These requirements 

seek to ensure that Defendants will not 

offer their units into the PJM auctions in 

a way that allows Defendants to raise 

the market clearing price. 

Requiring Defendants to hold the 

Divestiture Assets separate and distinct, 

a typical requirement in Antitrust 

Division hold separate stipulation and 

orders, would not have prevented 

competitive harm in the interim period 

from consummation to divestiture. The 

operator of the Divestiture Assets would 

have recognized that reducing their 

output would increase the clearing price 

and benefit Defendants’ remaining 

generating units. Therefore, the 

Stipulation requires that Defendants 

maintain offers for output of the 

Divestiture Assets at the specified 

levels. Defendants are relieved of the 

requirement to offer their units at no 

more than specified levels if they 

transfer to a third party the rights to 

offer and receive the revenues from the 

sale of the complete output of the 

Divestiture Assets. 

Remedies Available to Potential Private 

Litigants 

Section 4 of the Clayton Act, 15 

U.S.C. 15, provides that any person who 

has been injured as a result of conduct 

prohibited by the antitrust laws may 

bring suit in federal court to recover 

three times the damages the person has 

suffered, as well as costs and reasonable 

attorneys’ fees. Entry of the proposed 

Final Judgment will neither impair nor 

assist the bringing of any private 

antitrust damage action. Under the 

provisions of Section 5(a) of the Clayton 

Act, 15 U.S.C. 16(a), the proposed Final 

Judgment has no prima facie effect in 

any subsequent private lawsuit that may 

be brought against Defendants. 

VI. Procedures Available for 

Modification of the Proposed Final 

Judgment 

The United States and Defendants 

have stipulated that the proposed Final 

Judgment may be entered by the Court 

after compliance with the provisions of 

the APPA, provided that the United 

States has not withdrawn its consent. 

The APPA conditions entry upon the 

Court’s determination that the proposed 

Final Judgment is in the public interest. 

The APPA provides a period of at 

least sixty (60) days preceding the 

effective date of the proposed Final 

Judgment within which any person may 

submit to the United States written 

comments regarding the proposed Final 

Judgment. Any person who wishes to 

comment should do so within sixty (60) 

days of the date of publication of this 

Competitive Impact Statement in the 

Federal Register. All comments 

received during this period will be 

considered by the Department of Justice, 

which remains free to withdraw its 

consent to the proposed Final Judgment 

at any time prior to the Court’s entry of 

judgment. The comments and the 

response of the United States will be 

filed with the Court and published in 

the Federal Register. 

Written comments should be 

submitted to: Donna N. Kooperstein, 

Chief, Transportation, Energy & 

Agriculture Section, Antitrust Division, 

United States Department of Justice, 325 

Seventh Street, NW., Suite 500, 

Washington, DC 20530. 

The proposed Final Judgment 

provides that the Court retains 

jurisdiction over this action, and the 

parties may apply to the Court for any 

order necessary or appropriate for the 

modification, interpretation, or 

enforcement of the Final Judgment. 

VII. Alternatives to the Proposed Final 

Judgment 

The United States considered, as an 

alternative to the proposed Final 

Judgment, a full trial on the merits 

against Defendants. The United States 

could have continued the litigation and 

sought preliminary and permanent 

injunctions against Exelon’s acquisition 

of certain PSEG assets. The United 

States is satisfied, however, that the 

divestiture of assets described in the 

proposed Final Judgment will preserve 

competition in the market for wholesale 

electricity in PJM East and PJM Central/ 

East. 

VIII. Standard of Review Under the 

APPA for the Proposed Final Judgment 

The APPA requires that proposed 

consent judgments in antitrust cases 

brought by the United States be subject 

to a sixty (60) day comment period, after 

which the Court shall determine 

whether entry of the proposed Final 

Judgment ‘‘is in the public interest.’’ 15 

U.S.C. 16(e)(I). In making that 

determination, the Court shall consider: 

(A) The competitive impact of such 

judgment, including termination of alleged 

violations, provisions for enforcement and 

modification, duration of relief sought, 

anticipated effects of alternative remedies 

actually considered, whether its terms are 

ambiguous, and any other competitive 

considerations bearing upon the adequacy of 

such judgment that the court deems 

necessary to a determination of whether the 

consent judgment is in the public interest; 

and 

(B) The impact of entry of such judgment 

upon competition in the relevant market or 

markets, upon the public generally and 

individuals alleging specific injury from the 

violations set forth in the complaint 

including consideration of the public benefit, 

if any, to be derived from a determination of 

the issues at trial. 

15 U.S.C. 16(e)(1)(A) & (B).4 As the 

United States Court of Appeals for the 


sroberts on PROD1PC70 with NOTICES
49490 Federal Register / Vol. 71, No. 163 / Wednesday, August 23, 2006 / Notices 

of relevant factors when making a public interest 

determination. Compare 15 U.S.C. 16(e) (2004) with 

15 U.S.C. § 16(e)(1) (2006) (substituting ‘‘shall’’ for 

‘‘may’’ in directing relevant factors for court to 

consider and amending list of factors to focus on 

competitive considerations and to address 

potentially ambiguous judgment terms). This 

amendment does not affect the substantial 

precedent in this and other Circuits analyzing the 

scope and standard of review for Tunney Act 

proceedings. 

5Cf BNS, 858 F.2d at 464 (holding that the court’s 

‘‘ultimate authority under the [APPA] is limited to 

approving or disapproving the consent decree’’); 

United States v. Gillette Co.. 406 F. Supp. 713, 716 

(D. Mass. 1975) (noting that, in this way, the court 

is constrained to ‘‘look at the overall picture not 

hypercritically, nor with a microscope, but with an 

artist’s reducing glass’’); see generally Microsoft, 56 

F.3d at 1461 (discussing whether ‘‘the remedies 

[obtained in the decree are] so inconsonant with the 

allegations charged as to fall outside of the ‘reaches 

of the public interest’ ’’). 

District of Columbia Circuit has held, 

under the APPA a court considers, 

among other things, the relationship 

between the remedy secured and the 

specific allegations set forth in the 

government’s complaint, whether the 

decree is sufficiently clear, whether 

enforcement mechanisms are sufficient, 

and whether the decree may positively 

harm third parties. See United States v. 

Microsoft Corp., 56 F.3d 1448, 1458–62 

(D.C. Cir. 1995). 

With respect to the adequacy of the 

relief secured by the decree, a court may 

not ‘‘engage in an unrestricted 

evaluation of what relief would best 

serve the public.’’ United States v. BNS, 

Inc., 858 F.2d 456, 462 (9th Cir. 1988) 

(citing United States v. Bechtel Corp., 

648 F.2d 660, 666 (9th Cir. 1981)); see 

also Microsoft, 56 F.3d at 1460–62. 

Courts have held that: 

[t]he balancing of competing social and 

political interests affected by a proposed 

antitrust consent decree must be left, in the 

first instance, to the discretion of the 

Attorney General. The court’s role in 

protecting the public interest is one of 

insuring that the government has not 

breached its duty to the public in consenting 

to the decree. The court is required to 

determine not whether a particular decree is 

the one that will best serve society, but 

whether the settlement is ‘‘within the reaches 

of the public interest.’’ More elaborate 

requirements might undermine the 

effectiveness of antitrust enforcement by 

consent decree. 

Bechtel, 1648 F.2d at 666 (emphasis 

added) (citations omitted).5 In making 

its public interest determination, a 

district court must accord due respect to 

the government’s prediction as to the 

effect of proposed remedies, its 

perception of the market structure, and 

its views of the nature of the case. 

United States v. Archer-DanielsMidland Co., 272 F.Supp.2d 1, 6 (D.D.C. 

2003). 

Court approval of a final judgment 

requires a standard more flexible and 

less strict than the standard required for 

a finding of liability. ‘‘[A] proposed 

decree must be approved even if it falls 

short of the remedy the court would 

impose on its own, as long as it falls 

within the range of acceptability or is 

‘within the reaches of public interest.’ ’’

United States v. Am. Tel. & Tel. Co., 552 

F. Supp. 131, 151 (D.D.C. 1982) 

(citations omitted) (quoting United 

States v. Gillette Co., 406 F. Supp. 713, 

716 (D. Mass. 1975)), aff’d sub nom. 

Maryland v. United States, 460 U.S. 

1001 (1983); see also United States v. 

Alcan Aluminum Ltd., 605 F.Supp. 619, 

622 (W.D. Ky. 1985) (approving the 

consent decree even though the court 

would have imposed a greater remedy). 

Moreover, the Court’s role under the 

APPA is limited to reviewing the 

remedy in relationship to the violations 

that the United States has alleged in its 

Complaint, and does not authorize the 

Court to ‘‘construct [its] own 

hypothetical case and then evaluate the 

decree against that case.’’ Microsoft, 56 

F.3d at 1459. Because the ‘‘court’s 

authority to review the decree depends 

entirely on the government’s exercising 

its prosecutorial discretion by bringing 

a case in the first place,’’ it follows that 

‘‘the court is only authorized to review 

the decree itself,’’ and not to ‘‘effectively 

redraft the complaint’’ to inquire into 

other matters that the United States did 

not pursue. Id. at 1459–60. 

In its 2004 amendments to the 

Tunney Act, Congress made clear its 

intent to preserve the practical benefits 

of utilizing consent decrees in antitrust 

enforcement, adding the unambiguous 

instruction ‘‘[n]othing in this section 

shall be construed to require the court 

to conduct an evidentiary hearing or to 

require the court to permit anyone to 

intervene.’’ 15 U.S.C. 16(e)(2). This 

language codified the intent of the 

original 1974 statute, expressed by 

Senator Tunney in the legislative 

history: ‘‘[t]he court is nowhere 

compelled to go to trial or to engage in 

extended proceedings which might have 

the effect of vitiating the benefits of 

prompt and less costly settlement 

through the consent decree process.’’

119 Cong. Rec. 24,598 (1973) (statement 

of Senator Tunney). Rather: 

[a]bsent a showing of corrupt failure of the 

government to discharge its duty, the Court, 

in making its public interest finding, should 

* * * carefully consider the explanations of 

the government in the competitive impact 

statement and its responses to comments in 

order to determine whether those 

explanations a reasonable under the 

circumstances. 

United States v. Mid-America 

Dairymen, Inc., 1977–1 Trade Cas. 

(CCH) ¶ 61,508, at 71,980 (W.D. Mo. 

1977). 

IX. Determinative Documents 

There are no determinative materials 

or documents within the meaning of the 

APPA that were considered by the 

United States in formulating the 

proposed Final Judgment. 

Dated: August 10, 2006. 

Respectfully submitted, 

Mark J. Niefer (DC Bar #470370), 

Jade Alice Eaton (DC Bar #939629), 

Tracy Lynn Fisher (MN Bar #315837). 

Certificate of Service 

I hereby certify that on August 10, 

2006, I caused a copy of the foregoing 

Competitive Impact Statement to be 

served on counsel for Defendants in this 

matter in the manner set forth below: 

By electronic mail and hand delivery: 

Counsel for Defendant Exelon 

Corporation, John M. Nannes, Esq. 

(DC Bar #195966), Skadden, Arps, 

Slate, Meagher & Flom LLP and 

Affiliates, 1440 New York Ave., NW., 

Washington, DC 20005–2111. Tel: 

(202) 371–7090. Fax: (202) 661–9191. 

Counsel for Defendant Public Service 

Enterprise Group, Inc., Douglas G. 

Green, Esq. (DC Bar #183343), Steptoe 

& Johnson, LLP, 1330 Connecticut 

Ave., NW., Washington, DC 20036–

1795. Tel: (202) 429–6264. Fax: (202) 

429–3902. 

Mark J. Niefer (DC Bar #470370), 

Department of Justice, Antitrust Division, 325 

Seventh Street, NW., Suite 500, 

Washington, DC 20530. Tel: (202) 307–

6318. Fax: (202) 307–2784. 

[FR Doc. 06–7043 Filed 8–22–06; 8:45 am] 

BILLING CODE 4410–11–M 

NATIONAL ARCHIVES AND RECORDS 

ADMINISTRATION 

Agency Information Collection 

Activities: Proposed Collection; 

Comment Request 

AGENCY: National Archives and Records 

Administration (NARA). 

ACTION: Notice. 

SUMMARY: NARA is giving public notice 

that the agency proposes to request 

extension of an information collection 

currently in use. The information 

collection is NA Form 6045, Volunteer 

Service Application Form, used by 

individuals who wish to volunteer at 

the National Archives Building, the 

National Archives at College Park, 

regional records services facilities, and 


sroberts on PROD1PC70 with NOTICES