
USCA1 Opinion

	




          June 3, 1993      UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 92-1165                        NORTHEAST UTILITIES SERVICE COMPANY,                                      Petitioner,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1261                    VERMONT DEPARTMENT OF PUBLIC SERVICE, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1262             MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1263           TOWNS OF CONCORD, NORWOOD AND WELLESLEY, MASSACHUSETTS, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                ______________________          No. 92-1264                           CENTRAL MAINE POWER CO., ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1316                     CITY OF HOLYOKE GAS & ELECTRIC DEPARTMENT,                                      Petitioner,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1328                           CANAL ELECTRIC COMPANY, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1336                     THE AMERICAN PAPER INSTITUTE, INC., ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                  __________________          No. 92-1340                            BOSTON EDISON COMPANY, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1510                    VERMONT DEPARTMENT OF PUBLIC SERVICE, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                     ____________                                     ERRATA SHEET               The opinion of this court issued on May 19, 1993, is amended          as follows:               On page 28,  line 12  from the bottom,  within block  quote:          change "single person with a  least 75-percent" to "single person          with at least 75-percent".                 On  page 43,  line  3 from  the  bottom:   change  "born" to          "borne".                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 92-1165                        NORTHEAST UTILITIES SERVICE COMPANY,                                      Petitioner,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1261                    VERMONT DEPARTMENT OF PUBLIC SERVICE, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1262             MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1263           TOWNS OF CONCORD, NORWOOD AND WELLESLEY, MASSACHUSETTS, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                ______________________          No. 92-1264                           CENTRAL MAINE POWER CO., ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1316                     CITY OF HOLYOKE GAS & ELECTRIC DEPARTMENT,                                      Petitioner,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1328                           CANAL ELECTRIC COMPANY, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1336                     THE AMERICAN PAPER INSTITUTE, INC., ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                  __________________          No. 92-1340                            BOSTON EDISON COMPANY, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________          No. 92-1510                    VERMONT DEPARTMENT OF PUBLIC SERVICE, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________                          PETITIONS FOR REVIEW OF ORDERS OF                        THE FEDERAL ENERGY REGULATORY COMMISSION                                 ____________________                                        Before                               Torruella, Circuit Judge,                                          _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Boudin, Circuit Judge.                                          _____________                                 ____________________               Gerald M.  Amero, with whom Catherine R. Connors and Pierce,               ________________            ____________________     _______          Atwood,  Scribner,  Allen,  Smith   &  Lancaster  and  Arthur  W.          ________________________________________________       __________          Adelberg, and Anne M. Pare, were on brief, for petitioner Central          ________      ____________          Maine Power Company.               Harvey L. Reiter, with whom William I. Harkaway, Kathleen L.               ________________            ___________________  ___________          Mazure,  and McCarthy,  Sweeney &  Harkaway, were  on  brief, for          ______       ______________________________          petitioners Vermont Department of Public Service,  Vermont Public          Service  Board,  Rhode  Island  Attorney  General,  Rhode  Island          Division of Public Utilities and Carriers, Maine Public Utilities          Commission and Massachusetts Department of Public Utilities.               George H.  Williams, Jr.,  with whom  Morley Caskin,  was on               ________________________              _____________          brief,  for  petitioners  Canal  Electric  Company,  Commonwealth          Electric Company and Cambridge Electric Light Company.               J.A. Bouknight,  Jr., with  whom David B.  Raskin, David  L.               ____________________             ________________  _________          Schwartz,  and  Newman &  Holtzinger,  P.C., and  Robert  P. Wax,          ________        ___________________________       ______________          General  Counsel,   were  on  brief,   for  petitioner  Northeast          Utilities Service Company.               Randolph Elliott,  with whom  William  S. Scherman,  General               ________________              ____________________          Counsel, Jerome M. Feit, Solicitor, Katherine Waldbauer, and Eric                   ______________             ___________________      ____          Christensen,  were   on  brief,  for  respondent  Federal  Energy          ___________          Regulatory Commission.                                 ____________________               Alan  J. Roth, Scott H. Strauss, William S. Huang, Spiegel &               _____________  ________________  _________________ _________          McDiarmid, Nicholas J. Scobbo, Ferriter, Scobbo, Sikora, Caruso &          _________  __________________  __________________________________          Rodophele,  Wallace  L. Duncan  and  Duncan,  Weinberg, Miller  &          _________   __________________       ____________________________          Pembroke,  on  brief   for  petitioner  Massachusetts   Municipal          ________          Wholesale Electric Company.               Charles  F. Wheatley, Jr., Peter A. Goldsmith and Wheatley &               _________________________  __________________     __________          Ranquist, on brief for petitioners Towns of Concord, Norwood &           ________               David J. Bardin, Noreen M. Lavan, Eugene J. Meitgher, Steven               _______________  _______________  __________________  ______          R. Miles, and  Arent, Fox, Kintner, Plotkin & Kahn,  on brief for          ________       ___________________________________          petitioner City of Holyoke Gas & Electric Department.               James T.  McManus, Michael E. Small, Wright & Talisman, P.C.               _________________  ________________  _______________________          and Frederick S.  Samp, General Counsel, on  brief for petitioner              __________________          Bangor Hydro-Electric Co.               Steven  Halpern   on  brief  for   petitioner  Massachusetts               _______________          Department of Public Utilities.               Alan H.  Richardson on brief for  petitioner American Public               ___________________          Power Association.               Mitchell Tennenbaum,  Senior Staff  Attorney,  on brief  for               ___________________          petitioner Maine Public Utilities Commission.               Edward  G.  Bohlen,  Assistant Attorney  General,  and Scott               __________________                                     _____          Harshbarger,   Attorney   General,   on   brief   for  petitioner          ___________          Massachusetts Attorney General.               Julio  Mazzoli,  Special  Assistant,  and  James  E. O'Neil,               ______________                             ________________          Attorney General,  on brief for petitioner  Rhode Island Division          of  Public  Utilities and  Carriers  and Rhode  Island  Office of          Attorney General.               Robert F. Shapiro, Lynn N. Hargis and Chadbourne & Parke, on               _________________  ______________     __________________          brief for petitioner The American Paper Institute, Inc.               Wayne  R.  Frigard on  brief  for  petitioner Boston  Edison               __________________          Company.               George  M. Knapp, Roger B. Wagner, David A. Fazzone, John F.               ________________  _______________  ________________  _______          Smitka,  and McDermott,  Will  & Emery,  on brief  for petitioner          ______       _________________________          Montaup Electric Company.               Robert S. Golden, Jr.,  Assistant Attorney General,  Richard               _____________________                                _______          Blumenthal, Attorney  General,  and Howard  E.  Shapiro,  Special          __________                          ___________________          Assistant  Attorney General, and  Van Ness, Feldman  & Curtis, on                                            ___________________________          brief  for intervenor  Connecticut  Department of  Public Utility          Control.               Kenneth M. Simon, Larry F. Eisenstat, and Dickstein, Shapiro               ________________  __________________      __________________          & Morin, on brief for intervenor Masspower.          _______               Harold T.  Judd, Senior Assistant Attorney  General, John P.               _______________                                      _______          Arnold, Attorney  General,  Glen L.  Ortman,  John S.  Moot,  and          ______                      _______________   _____________          Verner, Liipfert, Bernhard, McPherson  and Hand, Chrtd., on brief          _______________________________________________________          for  intervenors The  State of  New Hampshire  and New  Hampshire          Public Utilities Commission.               Kenneth  D. Brown  on  brief for  intervenor Public  Service               _________________          Electric and Gas Company.               Edward  Berlin, Kenneth  G.  Jaffee, Martin  W. Gitlin,  and               ______________  ___________________  _________________          Swidler  & Berlin, and Cynthia A. Arcate, on brief for intervenor          _________________      _________________          New England Power Company.                                 ____________________                                     May 19, 1993                                 ____________________                      BOWNES, Senior Circuit Judge.   These petitions for                      BOWNES, Senior Circuit Judge.                              ____________________            review  challenge the Federal  Energy Regulatory Commission's            ("FERC"  or  "the   Commission")  decision  to  conditionally            approve  the merger  of  Northeast Utilities  ("NU") and  the            Public Service  Company of  New Hampshire ("PSNH").   Certain            joint petitioners  and intervenors1  contend that  FERC erred            when it:  (1) held that the benefits of the merger outweighed            its costs; and  (2) failed  to condition the  merger on  NU's            waiver  of  single  participant  status ("SPS")  in  the  New            England Power Pool ("NEPOOL").  A group of public and private            electric  utilities,  state   commissions,  state   agencies,            independent  power producers,  cogenerators and  electric end            users2  claim that  FERC  erred when  it:   (1)  allowed  the            consummation of  the merger upon  the filing of,  rather than            upon   approval  of,   a  transmission   tariff;  (2) adopted                                            ____________________            1   Joint petitioners and intervenors include:  Central Maine            Power  Company; Boston Edison  Company; Bangor Hydro-Electric            Company;  the  Towns  of  Concord,  Norwood  and   Wellesley,            Massachusetts;    Maine    Public    Utilities    Commission;            Massachusetts   Department   of  Public   Utilities;  Vermont            Department of Public  Service; Vermont Public Service  Board;            Rhode  Island Attorney  General;  Rhode  Island  Division  of            Public  Utilities  and   Carriers;  Massachusetts   Municipal            Wholesale  Electric  Company;  and,  City of  Holyoke  Gas  &            Electric Department.            2    This group  of petitioners and  intervenors includes the            joint petitioners and intervenors  listed in n.1, supra (with                                                              _____            the  exception of  Central Maine  Power Company),  and:   The            American  Paper  Institute,   Inc.;  American  Public   Power            Association;  Canal  Electric Company;  Commonwealth Electric            Company;  Cambridge  Electric  Light  Company;  Massachusetts            Attorney General; and, Montaup Electric Company.                                         -6-            transmission   access  conditions  that  gave  "native  load"            customers  a priority over  other customers; and (3) endorsed            "opportunity  cost" pricing  principles.   The Holyoke  Gas &            Electric Department ("Holyoke")  argues that FERC  erred when            it  failed  to:   (1) conduct  an  appropriate review  of the            environmental impact  of the  proposed merger; and,  (2) make            findings    regarding    allegations    of    anticompetitive            consequences  of  the merger  that  were  unique to  Holyoke.            Finally,  Northeast  Utilities   Service  Company   ("NUSCO")            asserts that FERC's orders  changing the terms of  three rate            schedules  filed in  conjunction with its  merger application            were arbitrary, capricious, and an abuse of discretion.                      For   the   reasons   which   follow,   we   reject            petitioners' arguments and affirm the  Commission's decisions            with the exception of the Commission's decision to change the            terms  of the  Seabrook Power  Contract which  we  remand for            consideration under the "public interest" standard.            I.   BACKGROUND.            I.   BACKGROUND.                 A.   Parties to the Approved Merger.                 A.   Parties to the Approved Merger.                      Northeast  Utilities ("NU") is a registered holding            company under the Public Utility Holding Company  Act of 1935            (PUHCA).  15 U.S.C.   79 et seq. (1988).  Northeast Utilities                                     __ ____            Service Company ("NUSCO") is  a service company subsidiary of                                         -7-            NU   and  supplies  centralized  administrative  and  support            services to NU's operating companies.3                      Prior to the merger,  Public Service Company of New            Hampshire ("PSNH")  was the  largest electric utility  in New            Hampshire, supplying  electric service to some 375,000 retail            customers,  approximately  three-quarters   of  the   State's            population, in every county in the State.  PSNH also provided            wholesale service to the New  Hampshire Electric Cooperative,            three  New Hampshire  municipalities, and  one investor-owned            utility,  Vermont  Electric  Power  Company.   PSNH  had  the            largest  ownership  share,  approximately  35.6  percent,  of            Seabrook Unit  No. 1, a nuclear  generating facility declared            to be available for service on June 30, 1990.                 B.   The Merger Proposal.                 B.   The Merger Proposal.                      On  January  28,  1988,  PSNH   filed  a  voluntary            petition  in  the  United  States Bankruptcy  Court  for  the            District of New Hampshire for reorganization under Chapter 11            of  the Bankruptcy Code.   11 U.S.C.    1101 et  seq. (1988).                                                         __  ____            PSNH  alleged that it was unable to  recover in its rates the            outlays  it had made in the construction and operation of the            Seabrook  nuclear power  plant.   On  April  20, 1990,  after                                            ____________________            3    NU's operating companies are Connecticut Light and Power            Company  (CL&P),  Western  Massachusetts   Electric  Company,            Holyoke  Water  Power  Company (HWP)  and  HWP's wholly-owned            subsidiary, Holyoke Power and Electric Company (HP&E).  These            companies are wholly-owned subsidiaries  of NU and are public            utilities supplying retail and wholesale electric service  in            Connecticut and Massachusetts.                                         -8-            sifting through several  competing reorganization plans,  the            bankruptcy court  approved NU's  proposal to merge  with PSNH            and to  acquire and operate  all of PSNH's  power facilities.            See In re Public Service Co. of New Hampshire, 963  F.2d 469,            ___ _________________________________________            470 (1st Cir.), cert.  denied, Rochman v. Northeast Utilities                            _____  ______  _______    ___________________            Service Co., 113 S. Ct. 304 (1992).            ___________                      NU's proposal contained a two-step process:  first,            PSNH would  emerge from  bankruptcy as a  stand-alone company            bound  to a merger agreement  with NU; second,  PSNH would be            merged  with   an  NU  subsidiary  created   solely  for  the            acquisition (NU Acquisition Corporation), with  PSNH emerging            as  the surviving entity.  After  the merger, PSNH would be a            wholly-owned  subsidiary   of  NU  and  would   transfer  its            ownership  interest   in  Seabrook  to  a   newly  formed  NU            subsidiary,   North   Atlantic  Energy   Corporation  ("North            Atlantic").    The second  step  would occur  only  after all            necessary  approvals   were   received  from   the   relevant            regulatory agencies.                 C.   Procedural History.                 C.   Procedural History.                      On January 8, 1990, NUSCO, on behalf of NU and NU's            operating subsidiaries, filed an  application with FERC under            section 203 of  the Federal  Power Act ("FPA"),  16 U.S.C.               824b (1988), seeking authorization for PSNH to dispose of all            of its  jurisdictional facilities and  concurrently to  merge            with, and become  a subsidiary  of, NU.   In connection  with                                         -9-            this application,  NUSCO filed four rate  schedules with FERC            pursuant to    205 of the FPA:  the Seabrook Power Contract,4            the   Sharing  Agreement5   and   two  Capacity   Interchange            Agreements.6                      The  Commission  consolidated consideration  of the            merger  application and  rate  schedules,  accepted the  rate            schedules for  filing and suspended their  effectiveness, and            set for  hearings before an administrative  law judge ("ALJ")            the questions  of whether the  Commission should grant  the              203  application  and  approve   the  rate  schedules.    See                                                                      ___            Northeast Utilities Service Co.,  50 F.E.R.C.   61,266, reh'g            _______________________________                         _____            granted  in part  and denied  in part,  51 F.E.R.C.    61,177            _____________________________________            (1990).  In its order, the Commission directed the parties to                                            ____________________            4  The  Seabrook Power Contract  is a life-of-the-unit  power            sales agreement between PSNH  and North Atlantic entered into            concurrently with  NU's acquisition of PSNH  and the transfer            of PSNH's share  of Seabrook  to North Atlantic.   Under  the            contract, PSNH  agreed  to purchase  North Atlantic's  entire            share of Seabrook capacity and  energy, according to a  cost-            of-service formula rate.  The contract was intended to ensure            that  North Atlantic would recover all of its costs from PSNH            regardless of whether or not Seabrook actually operated.            5   The Sharing Agreement allocates the benefits and obliga-            tions from the  integrated operation of PSNH and  the current            NU  system, as well as  the joint planning  and operations of            these  systems.   This  agreement established  a formula  for            sharing the  expected post-merger benefits that  would accrue            to NU and PSNH  operating companies as a result  of operating            efficiencies  and  the  ability  to take  single  participant            status under the NEPOOL agreement.            6   The  two Capacity Interchange Agreements provide  for the            sale  and purchase  of  energy between  PSNH and  Connecticut            Light & Power Company (CL&P) over a ten-year term.                                         -10-            address  the  effect of  the proposed  merger on  NU's market            power and "whether any transmission conditions  are necessary            to eliminate any  adverse effect of the  proposed merger and,            if  so,  what specific  conditions  should be  imposed."   50            F.E.R.C. at 61,834-35.                      On December  20, 1990,  the ALJ issued  its Initial            Decision  approving  the     203  application  and  the  rate            schedules   with   certain   modifications  and   conditions.            Northeast Utilities Service Co., 53 F.E.R.C.   63,020 (1990).            _______________________________            The Commission, in Opinion No. 364, issued on August 9, 1991,            affirmed in  part and  reversed in part  the ALJ's  decision,            conditionally approving  the    203 application and  the rate            schedules.   Northeast Utilities  Service Co., 56  F.E.R.C.                           ________________________________            61,269  (1991).    On  January 29,  1992,  after  considering            additional  filings  by  the  parties and  oral  argument  on            transmission  pricing issues,  the Commission  issued Opinion            No. 364-A,  affirming its  conditional approval of  the   203            application  and rate schedules.  Northeast Utilities Service                                              ___________________________            Co., 58 F.E.R.C.   61,070 (1992).            ___                      Petitions for review of  Opinions No. 364 and 364-A            were  filed in  this court  and in  the District  of Columbia            Circuit  Court.     The  Judicial   Panel  on   Multidistrict            Litigation  consolidated these petitions  for review  in this            court, where  further petitions for  review were  filed.   28            U.S.C.   2112(a) (1988).  Subsequently, in Opinion No. 364-B,                                         -11-            the Commission denied a request for  rehearing of Opinion No.            364-A.  Northeast Utilities Service Co., 59 F.E.R.C.   61,042                    _______________________________            (1992).  A petition for review of Opinions No. 364-A and 364-            B was filed in this court, where it was consolidated with the            earlier filed  petitions.  We review  the Commission's orders            under the jurisdiction established by 16 U.S.C.   825l.            II.  STANDARD OF REVIEW.            II.  STANDARD OF REVIEW.                      On  review,   we  give   great  deference  to   the            Commission's decision.   U.S. Dep't of Interior  v. FERC, 952                                     ______________________     ____            F.2d 538, 543  (D.C. Cir. 1992).  FERC's findings of fact are            reviewed under the "substantial evidence" standard of review.            16 U.S.C.   825l  ("The finding of  the Commission as to  the            facts,  if  supported  by  substantial  evidence,  shall   be            conclusive.").  Therefore,                      [w]e  defer  to  the agency's  expertise,                      particularly where the statute prescribes                      few specific standards  for the agency to                      follow,  so  long  as  its   decision  is                      supported  by  "substantial evidence"  in                      the  record  and  reached   by  "reasoned                      decisionmaking," including an examination                      of  the  relevant  data  and  a  reasoned                      explanation   supported   by   a   stated                      connection  between  the facts  found and                      the choice made.            Electricity  Consumers  Resource Council  v.  FERC, 747  F.2d            ________________________________________      ____            1511,  1513 (D.C. Cir. 1984).  "Pure" legal errors require no            deference  to agency  expertise,  and are  reviewed de  novo.                                                                __  ____            Questions involving an interpretation of the FPA involve a de                                                                       __            novo determination  by the court of  Congressional intent; if            ____                                         -12-            that  intent is  ambiguous,  FERC's conclusion  will only  be            rejected if  it  is unreasonable.    Chevron USA  v.  Natural                                                 ___________      _______            Resources  Defense  Council,  467  U.S.  837,  842-45 (1984);            ___________________________            Boston Edison Co. v. FERC, 856 F.2d 361, 363 (1st Cir. 1988).            _________________    ____            III. DISCUSSION.            III. DISCUSSION.                 A.   Conditional Approval of the Merger.                 A.   Conditional Approval of the Merger.                      1.   Background.                           __________                      In reaching  his  decision to  approve the  NU-PSNH            merger,  the   ALJ  found  that  the   merger  would  produce            significant benefits.  Specifically, he found that:  (1) PSNH            would emerge from bankruptcy  as a viable utility on  a solid            financial  footing,  53  F.E.R.C.  at  65,211;  (2)  improved            management techniques and economies of scale would reduce the            operating costs  of Seabrook by  some $527  million,7 id.  at                                                                  ___            65,212; (3) application of NU operating procedures  to PSNH's            fossil steam plants would save  $100 million, id. at  65,213;                                                          ___            (4) reductions in  administrative and general  expenses would            save  $124  million, id.;  (5) NU's  record of  buying lower-                                 ___            priced coal on the  spot market would save $39  million, id.;                                                                     ___            and (6) the merger would yield $360 million in savings for NU            because of  its ability to elect  "single participant status"                                            ____________________            7   This, and all other dollar amounts are net present values            unless otherwise noted.                                         -13-            in  the  New  England  Power  Pool  (NEPOOL),  a  power  pool            comprised of most of the utilities in New England.  Id.                                                                ___                      The ALJ  also found that  unless several conditions            were  imposed, the  merger  would have  short- and  long-term            anticompetitive consequences because of the  merged company's            increased market  power over  key transmission  facilities in            both  the New England region and the Rhode Island and Eastern            Massachusetts submarket ("Eastern  REMVEC").  53 F.E.R.C.  at            65,214-19.   Under the  authority of   203(b)  of the FPA, 16            U.S.C.    824b(b), the  ALJ  approved the  merger subject  to            several conditions, including the  following:  (1) the merged            company  must  offer  firm  (non-interruptible)  transmission            service  for a minimum of 30 days  and a maximum of 20 years,            53  F.E.R.C.  at  65,220-21;  (2) non-firm  service  must  be            offered  for a one-day minimum  term, id. at  65,220; (3) the                                                  ___            merger would be consummated concurrently with the filing of a            compliance tariff which fully reflects  all of the terms  and            conditions set  out in  the ALJ's  Initial  Decision, id.  at                                                                  ___            65,221;  (4) NU  must  implement its  New Hampshire  Corridor            Proposal,8 thereby  making available  400 MW  of transmission                                            ____________________            8   The  New Hampshire Corridor Transmission  Proposal allows            New  England  utilities  to purchase  long-term  transmission            rights from NU-PSNH in order to connect with power sources in            northern New England and Canada.  See 53 F.E.R.C. at 65,225.                                              ___                                         -14-            capacity  for wheeling9  by  utilities in  both northern  and            southern New  England, id.  at 65,225-27; and  (5) the merged                                   ___            company's veto  power on NEPOOL's  Management Committee would            be restricted for the ninety day period immediately following            consummation of the merger, id. at 65,230-31.                                        ___                      In  Opinion No.  364, the  Commission affirmed  the            ALJ's finding  that the merger, with  appropriate conditions,            was consistent  with  the public  interest.   56 F.E.R.C.  at            62,011.  It held,  however, that the $364 million  cost-shift            between NU-PSNH and other NEPOOL members should not have been            counted  as a benefit of the merger because it simply shifted            costs dollar-for-dollar  among the membership without any net            savings.10    56 F.E.R.C.  at  61,997.   The  Commission also            held  that,  in evaluating  the  costs  and benefits  of  the            merger, the ALJ  correctly attributed the benefits  resulting            from  the merger to the  merger even if  those benefits could            have been  achieved  by other  means.11   Id.  at  61,994-96.                                                      ___            This conclusion  was reiterated  on rehearing in  Opinion No.            364-A.  58 F.E.R.C. at 61,186-87.                                            ____________________            9   "Wheeling" is defined as the "transfer by direct trans-            mission or displacement [of]  electric power from one utility            to another  over the facilities of  an intermediate utility."            Otter Tail Power Co. v. U.S., 410 U.S. 366, 368 (1973).            ____________________    ____            10   This issue is discussed in Part III(B), infra.                                                         _____            11   This issue is discussed in Part III(A)(3), infra.                                                            _____                                         -15-                      Petitioners  and intervenors argue that FERC erred,            as  a matter  of law,  in holding  that  the benefits  of the            merger outweighed its costs.                                         -16-                      2.   The Statutory Standard.                           ______________________                      FERC's   authority   to    consider   the    merger            applications of utilities  is set  forth in    203(a) of  the            FPA, 16  U.S.C.   824b(a):  the Commission  "shall approve" a            proposed merger of utility facilities if, "[a]fter notice and            opportunity  for hearing, . . . the Commission finds that the            proposed disposition, consolidation, acquisition,  or control            will  be  consistent with  the public  interest."   Id.   The                                                                ___            Commission has the additional authority to grant approval for            such transactions "upon such terms and conditions as it finds            necessary   or  appropriate  to  secure  the  maintenance  of            adequate service and the  coordination in the public interest            of facilities subject to the jurisdiction of the Commission."            16 U.S.C.     824b(b).    As the  Commission  noted  when  it            reviewed the Initial Decision of the ALJ,                      [m]erger  applicants need not show that a                      positive  benefit  will  result   from  a                      proposed  merger.    The  applicant  must                      fully  disclose  all  material facts  and                      show  affirmatively  that  the merger  is                      consistent with the public interest.   It                      is  sufficient  if  the "probable  merger                      benefits  . . .  add up  to substantially                      more than the costs of the merger."            56 F.E.R.C. at  61,994 (quoting  Utah Power &  Light Co.,  47                                             _______________________            F.E.R.C.  at  61,750  (1989)  (footnotes omitted);  see  also                                                                _________            Pacific Power  & Light Co.  v. Federal Power  Commission, 111            __________________________     _________________________            F.2d  1014,  1016 (9th  Cir. 1940).    We review  the record,            therefore, to determine whether the Commission's finding that                                         -17-            the   probable   benefits   of   the  NU-PSNH   merger   were            substantially  more   than   its  costs   was  supported   by            substantial evidence.                      3.   Discussion.                           __________                      Petitioners make two claims  with regard to  FERC's            evaluation  of the costs and benefits  of the NU-PSNH merger.            First,  they  argue  that  the  Commission  should  not  have            included resolution of PSNH's bankruptcy as a  benefit of the            merger because:  (1) PSNH actually emerged from bankruptcy on            May 16, 1991, the  effective date of the  Reorganization Plan            ("RP");  and  (2) prior  to  gaining  the bankruptcy  court's            approval  of the two-step RP, PSNH  had to show that it would            be  financially  viable  as   a  stand-alone  entity  because            regulatory approval  for the  second step  of the  RP (merger            with and into NU) was not assured.  These two facts, however,            do not  imply that  it was  error for  FERC  to consider  the            "resolution of PSNH's bankruptcy" as  a benefit, indeed as  a            principal benefit, of the merger.                        It  is  true  that  PSNH, as  a  technical  matter,            "emerged" from  bankruptcy prior  to FERC's  consideration of            the proposed merger.  The ALJ and the Commission did not hold            otherwise.   The  ALJ  stated, and  the Commission  summarily            affirmed the fact that "[t]he merger is part of  a plan which                                                 __________________            enables a  reorganized PSNH to  emerge from bankruptcy."   53            F.E.R.C. at 65,211  (emphasis added); see also 56 F.E.R.C. at                                                  ___ ____                                         -18-            61,993.  Like the state regulators  who approved the two-step            merger  plan, the Commission  evaluated the plan  as a whole,            anticipating  "the merger   not  `stand alone' PSNH    as the            ultimate destiny  for the reorganized company."   53 F.E.R.C.            at 65,211.   "All parties to  the reorganization contemplated            [stand  alone]  status as  an interim  step  en route  to the            merger."  Id.   It was the entire  plan, which admittedly had                      ___            two  sequential and  severable  steps, that  allowed PSNH  to            emerge  from bankruptcy.  There is no evidence that the state            regulators would have approved a plan to allow PSNH to emerge            from bankruptcy  that included  only the first  "stand alone"            step.  Indeed, there is evidence to the contrary.                      FERC  also found that "resolving" PSNH's bankruptcy            meant  more  than  simply  the emergence  of  PSNH  from  the            protection of  bankruptcy court.   FERC held  that the  final            resolution of PSNH's bankruptcy included the treatment of its            creditors and  stockholders who stood  to lose  approximately            $250 million  in  the absence  of  the merger.    As the  ALJ            observed, the Commission "regard[s] the right of these public            bondholders as of primary importance after the consumers have            been protected."  53 F.E.R.C. at 65,211 (quoting In re Evans,                                                     _______ ___________            1 F.P.C. 511, 517  (1937) (approving an acquisition involving            the reorganization  of a bankrupt utility)).   The Commission            also held that it was  in the public interest to  approve the            creation  of a  stronger, more  viable merged  entity, rather                                         -19-            than leaving PSNH in a "weakened", "stand alone" state.  This            holding was sufficiently supported by evidence in the record.                      Petitioners also  claim that, given  the bankruptcy            court's   "feasibility   finding"  required   by   11  U.S.C.              1129(a)(11),12  the Commission  was estopped  from reaching            the  conclusion that a "stand  alone" PSNH would  be "weak."             We disagree.   The  bankruptcy court  and FERC evaluated  the            merger proposal under  different standards.   The  bankruptcy            court  was required  to determine  the likelihood  of further            liquidation or reorganization proceedings were the plan to be            approved.  FERC was obliged to determine whether the plan was            "consistent  with   the  public   interest."    It   was  not            inconsistent for FERC to find that although PSNH was  capable            of  surviving  as  a stand  alone  entity,  it  would not  be            "consistent  with the  public interest"  to prevent  a merger            that  would  result   in  an  even  stronger  utility.    The            principles of estoppel simply do not apply  in a case such as            this, where the issues litigated and the standards applied in            the two proceedings are so different.                                             ____________________            12   The Bankruptcy Code provides that:                 (a)   The   court   shall  confirm   a   plan   [of                 reorganization]  only  if   all  of  the  following                 requirements are met:                 (11) confirmation  of the plan is not  likely to be                 followed  by  the  liquidation,  or  the  need  for                 further financial reorganization, of the  debtor or                 any successor to the  debtor under the plan, unless                 such liquidation  or reorganization is  proposed in                 the plan.              11 U.S.C.   1129(a)(11).                                         -20-                      Even were petitioners correct in their asseveration            that  FERC  improperly  counted  the  resolution   of  PSNH's            bankruptcy  as a  benefit  of the  merger, "the  Commission's            error would be immaterial in light of the overwhelming excess            of other  benefits ($791  million) over  the costs  (0) still            attributable . . . to the acquisition."   City of Holyoke Gas                                                      ___________________            & Elec. Dep't v. S.E.C., 972 F.2d 358, 362 (D.C. Cir. 1992).            _____________    ______                      Second,  petitioners  argue that  FERC  erred  as a            matter  of law  in  weighing as  merger  benefits results  or            alleged  savings   that  were,  or  could   be,  achieved  by            "alternate  means."   Specifically, petitioners  contend that            FERC's   failure  to   apply  the   "alternate   means"  test            contradicted  general agency  policy  and  general  antitrust            principles.                       It is undisputed  that utilities  are "not  immune"            from antitrust laws.   Otter Tail Power Co. v. U.S., 410 U.S.                                   ____________________    ____            366,  372-75 (1973); Town  of Concord  v. Boston  Edison, 915                                 ________________     ______________            F.2d  17 (1st  Cir.  1990), cert.  denied,  111 S.  Ct.  1337                                        _____________            (1991).  At issue in this case is whether FERC is required by            statute,  or otherwise,  to  engage  in "standard"  antitrust            analysis before  passing on    203  merger applications.   In            claiming that  FERC has such an  obligation, petitioners rely            on a statute  governing agency approval of  bank mergers (the                                         -21-            "Bank  Merger  Act")  which   states  that  the  agency  with            jurisdiction over a proposed bank merger,13                      shall not approve                           (A)  any  proposed merger  transaction                      which  would result  in  a  monopoly,  or                      which  would  be  in furtherance  of  any                      combination  or conspiracy  to monopolize                      or  to attempt to monopolize the business                      of  banking in  any  part  of the  United                      States, or                         (B)   any    other   proposed   merger                      transaction whose effect  in any  section                      of  the country  may be  substantially to                      lessen  competition, or to tend to create                      a monopoly, or which in any  other manner                      would be in restraint of trade, unless it                      finds that the anticompetitive effects of                      the  proposed   transaction  are  clearly                      outweighed in the public interest  by the                      probable  effects  of the  transaction in                      meeting the convenience  and needs of the                      community to be served. . . .                      (6)   The    responsible   agency   shall                      immediately  notify the  Attorney General                      of any  approval by  it pursuant  to this                      subsection    of   a    proposed   merger                      transaction.            12 U.S.C.   1828(c)(5)-(6).   The Supreme Court, interpreting            the Bank Merger Act, has held that before a bank merger which            is  injurious to  the  public interest  may  be approved,  "a            showing [must] be made that the gain expected from the merger            cannot  reasonably be expected through other means."  U.S. v.                                                                  ____            Phillipsburg Nat. Bank & Trust Co., 399 U.S. 350, 372 (1970).            __________________________________            Petitioners claim that the language of the Bank Merger Act is            sufficiently similar to the statute governing FERC's approval                                            ____________________            13   Jurisdiction varies  depending on whether  the resulting            entity  is  a national  bank, a  state  member bank,  a state            nonmember bank, or a savings association.                                         -22-            of  proposed  mergers,  16  U.S.C.    824b(a),  because  both            contain  a "public interest" standard, to require FERC to use            the "alternate means" test which  bank regulators must use in            evaluating proposed bank mergers.  We disagree.                      As with  any matter  of statutory construction,  we            first examine the language  of the statute.  Under  16 U.S.C.              824b(a),  the  Commission  is required,  after  notice  and            opportunity  for hearing,  to  approve a  proposed merger  of            utility  facilities if  it finds  that the proposal  "will be            consistent  with  the  public interest."    That  is all  the            statute  says.  There  is no explicit  reference to antitrust            policies or principles.   There is no  evidence that Congress            sought  to  have  the  Commission  serve  as  an  enforcer of            antitrust  policy  in  conjunction  with  the  Department  of            Justice and  the Federal Trade  Commission.  The  Bank Merger            Act  reveals a  quite different  intention.   There, Congress            explicitly  set out  standards for  approval of  bank mergers            that incorporate  principles  embodied  in  the  Sherman  and            Clayton  Acts.   12  U.S.C.   1828(c)(5).   By  requiring the            reviewing  agency  to  notify  the Attorney  General  of  any            decision  to approve  a  proposed bank  merger,  12 U.S.C.               1828(c)(6),  Congress  expressed  its  desire  to  have  bank            regulators  serve as pre-screening  bodies of  mergers which,            because of their importance or character, in most  cases also            deserve the attention of the Department of Justice.                                         -23-                      The Bank  Merger Act  carries with it  the implicit            presumption that  mergers are  to be disapproved  (the agency            "shall not approve" a  bank merger "unless it finds  that the            anticompetitive  effects are clearly outweighed in the public            interest"  by   the  benefits   of  the  merger,   12  U.S.C.              1828(c)(5)).   The  FPA,  on the  other hand,  requires the            Commission to approve any merger that is "consistent with the            public  interest."     16   U.S.C.     824b(a).     Antitrust            considerations   are,   of   course,   relevant   in   FERC's            consideration of  the "public interest"  in merger proposals.            The  statute,  however,  does  not require  FERC  to  analyze            proposed mergers under the same standards that the Department            of Justice or bank regulators must apply.                      Although  the  Commission  must  include  antitrust            considerations in its public interest calculus under the FPA,            it is not  bound to use antitrust principles when they may be            inconsistent  with the  Commission's  regulatory goals.   See                                                                      ___            Otter  Tail,   410  U.S.   at   373  ("[a]lthough   antitrust            ___________            considerations  may be  relevant [in  determining  the public            interest], they are not determinative").  In Town of Concord,                                                         _______________            this  court  observed  that indiscriminate  incorporation  of            antitrust policy into utility regulation  "could undercut the            very objectives  the antitrust  laws are designed  to serve."            915  F.2d  at  22.     Therefore,  "antitrust  analysis  must            sensitively `recognize and  reflect the distinctive  economic                                         -24-            and  legal  setting' of  the regulated  industry to  which it            applies."   Id. (quoting Watson &  Brunner, Monopolization by                        ___  _______                    _________________            Regulated   "Monopolies":     The   Search  for   Substantive            _____________________________________________________________            Standards, 22 Antitrust Bull. 559, 565 (1977)).            _________                      Petitioners  may  rest  assured that  were  FERC to            approve  a merger of utilities which ran afoul of Sherman Act            or other  antitrust policies, the utilities  would be subject            to either prosecution by government officials responsible for            policing the antitrust laws,  or to suit by private  citizens            meeting the requirements  of standing.   See Otter Tail,  410                                                     ___ __________            U.S. at 374-5.                 B.   FERC's  Failure to Condition  Merger on NU's Waiver                 B.   FERC's  Failure to Condition  Merger on NU's Waiver                      of Single Participant Status.                      of Single Participant Status.                      Petitioners  argue  that  the  Commission  erred in            failing to  condition the merger on waiver  by NU and PSNH of            "single participant status" ("SPS")  in the New England Power            Pool ("NEPOOL"), thereby preventing  the imposition of a $364            million cost shift  from NU and PSNH to  the other members of            NEPOOL.                      1.   Background.                           __________                      NEPOOL is  a power  pool comprised  of most  of the            utilities in New England.  The association is governed by the            New England  Power  Pool Agreement  ("the  Agreement")  which            establishes a "comprehensive interconnection and coordination            arrangement" among  its members in order  "to achieve greater                                         -25-            reliability and economies in the  production of electricity."            Groton v.  FERC,  587  F.2d  1296,  1298  (D.C.  Cir.  1978).            ______     ____            Section  202(a)  of the  Federal  Power  Act encourages  such            voluntary  interconnection  and  coordination of  electricity            generating facilities in order to achieve economies of scale.            16  U.S.C.    824a; see  also 16  U.S.C.    824a-1 (regarding                                ___  ____            pooling  agreements).  The Agreement  was approved as a filed            rate  schedule  by  FERC's  predecessor,  the  Federal  Power            Commission.   53 F.E.R.C. at  65,213.  Under  its terms, each            member  is  required  to   supply  the  pool  with  resources            ("Capacity Responsibility") according to a formula based upon            the  relationship of the member's peak load to an estimate of            aggregate peak load of all members.                      NU  experiences its  peak load  in the  summer, and            PSNH experiences its peak load in the winter.  By aggregating            these two,  complementary, peak loads, NU-PSNH  can achieve a            lower Capacity Responsibility than would  be the case if  the            two   utilities  remained  separate.    Because  the  overall            capacity requirements of NEPOOL  will not change as  a result            of the merger, the Capacity Responsibilities of other members            must rise to  make up  for the savings  accruing to  NU-PSNH.            The  ALJ  accepted  the  "undisputed" estimate  that  "single            participant status" (SPS)  will result in a  shifting of some            $360  million in costs from  NU-PSNH to other  members of the            pool.  Id.                   ___                                         -26-                                         -27-                      2.   Discussion.                           __________                      Petitioners  offer six  arguments to  support their            claim that FERC erred  in failing to condition the  merger on            waiver of SPS by NU and PSNH.  First, petitioners  claim that            the Commission  did not  properly interpret the  provision of            the NEPOOL Agreement which  governs the election of SPS.   We            agree with  the Commission's finding that  the Agreement both            specifically allows for the election  by NU-PSNH of SPS,  and            encourages  such elections.    Section 3.1  of the  Agreement            provides in relevant part that:                      All  Entities which  are controlled  by a                      single person (such as a corporation or a                      common law business  trust) which owns at                      least seventy-five percent of  the voting                      shares   of   each  of   them   shall  be                                                      _____                      collectively   treated    as   a   single                      Participant   for    purposes   of   this                      Agreement, if they elect  such treatment.                      They are  encouraged to  do so.   Such an                      ______________________________                      election shall  be  made by  signing  the                      appropriate   form  at   the  end   of  a                      counterpart of this Agreement.            (Emphasis  supplied.)    Both  the  ALJ  and  the  Commission            interpreted section 3.1 to be  an explicit endorsement of the            election of  SPS by NU-PSNH.   The  ALJ stated that  "[i]t is            undisputed  that  NU  and   PSNH  qualify  for  such  [single            participant]  status under  the Agreement."   53  F.E.R.C. at            65,213.  The Commission  gave great weight to the  unrebutted            testimony  of  witness  Bigelow,   who  participated  in  the            negotiation of  the NEPOOL Agreement regarding  the intent of            the  original  signatories   to  the   Agreement  and   their                                         -28-            recognition  of  such  potentially  large  cost-shifts  among            NEPOOL members.  Bigelow stated:                      [W]hen  we put  NEPOOL together  20 years                      ago,  we  recognized  that  these  things                      might happen.  This is not something that                      snuck  up  on people. . . .   And  we did                      discuss  at  length  what   would  happen                      because . . . we were then coming up to a                      potential   merger   of  Boston   Edison,                      Eastern Utilities, New England Power.  It                      was recognized that these kinds of things                      could happen in the future and we spelled                      out the ground rules and  recognized that                      that would  happen when it happened.  And                      the  people   who  didn't  like   it  got                      something else for it.            53  F.E.R.C.  at 65,214.   Both  the  ALJ and  the Commission            rejected petitioners' claim on the basis of both the language            of the Agreement, and Bigelow's unrebutted testimony that not            only  had the  signatories been  aware of such  a potentially            large  savings  shift, but  that  those  utilities that  were            dissatisfied  with this risk  received additional concessions            as  compensation.    We  will not  disturb  the  Commission's            findings.                      Second,  petitioners claim  that the  Agreement, as            interpreted in  NEPOOL Power Pool Agreement,  56 F.P.C. 1562,                            ___________________________            1580 (1976), aff'd sub nom. Municipalities of Groton v. FERC,                         ______________ ________________________    ____            587 F.2d 1296 (D.C. Cir. 1978), prohibits utilities with peak            loads  in different  seasons  from  electing  SPS.    As  the            Commission  explained,  this  argument  mischaracterizes  the            Agreement and  the decision  of the Federal  Power Commission            ("FPC") in NEPOOL.                       ______                                         -29-                      The NEPOOL Agreement, as  initially filed                      and    as   approved,    allowed   single                      participant    status    for    utilities                      controlled by a single "person" owning at                      least 75 percent of the voting shares  of                      each utility.  An exception was expressly                      allowed  in the  filed agreement  for any                      Vermont  utility  which  elected   to  be                      grouped   with  Vermont   Electric  Power                      Company.  This exception was approved for                      essentially two reasons:  (1) the Vermont                      utilities  had  long  acted  as  a single                      contiguous  integrated  electric  entity;                      and (2) since  they all experienced their                      peak loads in winter,  single participant                      status would not give them a lower NEPOOL                      Capability Responsibility (and consequent                      savings).    A   broader  exception   was                      denied, however, for a group of municipal                      utilities (represented by MMWEC) that was                      not entitled to single participant status                      and  that lacked the two cited attributes                      of the  Vermont utilities.  The basis for                      the denial was that allowing  such status                      for "any group of systems, such as MMWEC,                      could   well   be   detrimental  to   the                      functioning of NEPOOL."                         The  NEPOOL  decision, thus,  does not                      stand  for  the  proposition that  single                      participant status is  available only  to                      utilities  having their peak loads in the                      same  season.    Instead,   another  way,                      indeed   the   primary   way,  in   which                      utilities  may qualify  is  if  they  are                      controlled  by a  single  person with  at                      least 75-percent common ownership.   That                      is the basis upon  which NU and PSNH will                      presumably seek to  qualify if the merger                      is  approved.   Such status  is expressly                      allowed   under   the  NEPOOL   Agreement                      regardless of when NU and PSNH experience                      their peak loads.            56 F.E.R.C. at 61,996-97.  The reasons  offered by the FPC in            its  decision  to  grant  a  special  exception  for  Vermont            utilities seeking SPS were  not intended to be, and  are not,            conditions, in  addition to those  set out in  the Agreement,                                         -30-            which must be satisfied to elect SPS.  The FPC did not narrow            the scope of Section  3.1 to apply only to  utilities sharing            the  same peak  load  season; rather,  it  created a  special            exception to the  75 percent rule  to accommodate the  unique            situation faced by Vermont utilities.                      Third, petitioners  claim that FERC failed  to give            proper consideration  to Section  4.2 of the  Agreement, "the            interests of  other  pool members,  and  the purpose  of  the            Agreement as  a whole."  Essentially,  petitioners argue that            allowing  NU-PSNH  to  elect  SPS  would  violate  a  general            provision  of the  Agreement, which states  that participants            "shall  not . . . take  advantage of  the provisions  of this            Agreement so  as to harm another Participant  or to prejudice            the  position  of any  Participant  in  the electric  utility            business."   We  reject  this argument  for the  same reasons            expressed   by  the  Commission   in  its   decision  denying            petitioners' request for a rehearing:                      [W]e  find more  relevance in  the NEPOOL                      Agreement's   explicit   endorsement   of                      single  participant  status  than in  the                      agreement's  general  goal of  "equitable                      sharing"   and  prohibition   on  members                      "taking  advantage"  of the  agreement to                      harm  or prejudice  other  members.   The                      NEPOOL Agreement  specifically encourages                      eligible    parties   to    seek   single                      participant status;  the provisions cited                      by  the  intervenors  are   general,  not                      specific.      Construing   the   general                      consistent  with  the  specific, we  find                      single participant status for  the merged                      company  consistent   with  an  equitable                      sharing,  as  envisioned  by  the  NEPOOL                                         -31-                      Agreement, and not  violative of the  ban                      on  taking  advantage of  the agreement's                      provisions  to  harm  or prejudice  other                      members.            58 F.E.R.C. at 61,189.   We agree with FERC's  interpretation            of  the  Agreement.     The  NEPOOL  signatories   explicitly            encouraged  qualified  members  to  seek  SPS,   indeed  they            contemplated that members that merged might choose to do just            that.   We agree  with the  Commission's construction  of the            Agreement which avoids a direct conflict between Sections 3.1            and 4.2, and instead gives both provisions reasonable effect.                      Fourth, petitioners argue that failure to condition            the   merger  on   waiver  of   SPS  would   create  "serious            disincentives"   for  current   members  to   continue  their            membership  in NEPOOL,  and  that the  breakup  of NEPOOL  is            contrary to the public interest.  Petitioners imply that FERC            did not take seriously their complaints about SPS, but rather            rested its decision  not to  require a waiver  solely on  the            fact that the Agreement allowed the election of SPS.  This is            simply not so.                      The  Commission reversed  the ALJ  on the  issue of            whether SPS savings  should be  counted as a  benefit of  the            merger.   The Commission  found that  because the  cost shift            amounted  to  a  zero-sum   transaction,  with  NU  and  PSNH            benefitting and the other members burdened dollar-for-dollar,            the shift could not  be counted as a  benefit of the  merger.                                         -32-            56  F.E.R.C. at 61,997.  Thus, the Commission did not dismiss            petitioners' claims regarding SPS without thought.                      Also,  the ALJ  found,  and the  Commission agreed,            that SPS was essential to the merger, and that the merger, as            conditioned, was in the public interest.  FERC must approve a            proposed merger if it is consistent with the public interest.            16  U.S.C.    824b(a).    FERC  has  the  discretion  to  add            conditions  to a proposed  merger to  ensure that  the merger            will, taken as a whole, be in the public interest.  16 U.S.C.               824b(b).    FERC  need  not, however,  explain  why  every            condition, or failure to  establish a condition is consistent            with the public interest when considered separately and apart            from the entire transaction.  Petitioners seem to argue  that            FERC was required by law to  state why it was consistent with            the  public interest  to  follow the  explicit  terms of  the            approved fifteen  year-old  NEPOOL Agreement  rather than  to            condition  the  merger  on   waiver  of  a  membership  right            established by the Agreement.   FERC had no such  obligation.            It need not have  explained why it failed to add a particular            condition  prior to approving  a merger.   The statute simply            provides that "[t]he Commission may grant any application for            an order under this section in whole or in part and upon such            terms and conditions as it  finds necessary or appropriate to            secure the  maintenance of adequate  service and coordination            in  the   public  interest  of  facilities   subject  to  the                                         -33-            jurisdiction  of the Commission."   16 U.S.C.    824b(b).  In            this  case, the Commission  set forth a  reasonable basis for            approving the  merger as consistent with  the public interest            in light of the supplementary conditions the Commission found            necessary.   FERC  need not  have gone  further than  this to            explain  why it  failed  to place  further conditions  on the            merger.                      Fifth,   petitioners   allege   that   FERC   acted            inconsistently in  its  treatment of  the NEPOOL  Agreement's            provisions regarding  voting rights and SPS.   The Commission            adopted  a  condition limiting  the  merged company's  NEPOOL            voting  rights to  prevent PSNH  and NU  from gaining  a veto            power  in NEPOOL.  56  F.E.R.C. at 62,043-45.   FERC reasoned            that,  while   there  was   evidence  that   the  signatories            anticipated  that  large   cost-shifts  would  accompany  the            election  of SPS in merger  situations, there was no evidence            that they anticipated the  voting rights implications of such            mergers.   58 F.E.R.C.  at 61,189.   It was not,  contrary to            petitioners' argument,  inconsistent as a matter  of logic to            condition voting rights where the Agreement was silent on the            need or lack of need to do so, while failing to condition SPS            where the  Agreement explicitly favored the  election of SPS.            Furthermore, it was not  an error of law to  condition voting            rights while  leaving SPS  rights untouched.   Petitioners do            not  contest the Commission's decision to condition NU-PSNH's                                         -34-            voting  rights.    We  will uphold  whatever  conditions  the            Commission  imposes on  a proposed  merger  so long  as their            necessity is supported in the record by substantial evidence.                      Finally,  petitioners  contend that  the Commission            "failed to  explain why  burdening other NEPOOL  members with            $364 million in additional  costs with no offsetting benefits            to them is consistent  with the public interest."   In making            this argument, petitioners imply that each and every piece of            a complex package of merger agreements and conditions must be            able to  withstand "public interest"  analysis without regard            to other pieces of the package or to other conditions imposed            by  the  Commission.   Petitioners  also  imply that  if  any            individual or group is harmed by a piece of the package, that            provision is not in the public interest and must therefore be            stricken  or modified.   Both  implicit arguments  are deeply            flawed.                      In  evaluating a  transaction  such as  the one  at            issue  here, the  Commission  is required  to  find that  the            entire transaction, taken as a whole,  is consistent with the            public interest.  16 U.S.C.    824b(a).  Each element of  the            transaction  need not  benefit  every  utility or  individual            which might  be affected; rather, the  whole transaction must            be consistent with the interest of "the public."  There is no            reason  to  think  that  the interest  of  individual  NEPOOL            members is  synonymous with  the "public"  interest.  As  has                                         -35-            already been noted,  FERC may  add conditions  to a  proposed            merger before granting approval.   16 U.S.C.   824b(b).   The            statute  does  not  require,  however,  that  FERC  establish            conditions so  that every effect of an  approved merger could            withstand the "public interest" test.                      At  a less  theoretical level,  the ALJ  determined            that the NEPOOL savings  "were a vital  part of the long  and            strenuous negotiations which culminated in the resulting PSNH            reorganization plan,"  and  the particular  savings  of  $146            million   for  New   Hampshire   consumers  were   relied  on            specifically by the  State of New Hampshire in  approving the            merged company's rate package.   53 F.E.R.C. at 65,213.   The            Commission accepted this  finding of the  ALJ, while, at  the            same time, it reversed  the ALJ's decision to count  the $360            million as  a benefit of the merger.   58 F.E.R.C. at 61,997.            The fact that  the cost-shift was not a benefit to be counted            in weighing the  benefits and  costs of the  merger does  not            mean that  the election of SPS and the concomitant cost-shift            is not in  the public interest.   Election of  SPS is in  the            public interest because it is a central element of the merger            plan  which, viewed  as  a whole,  was  found by  FERC  to be            consistent  with  the public  interest  based  on substantial            evidence in the record.  We approve the Commission's decision            not to condition the merger on waiver by NU of SPS.                 C.   Timing of Merger's Consummation.                 C.   Timing of Merger's Consummation.                                         -36-                      In  the  proceedings before  the  ALJ,  NU proposed            filing  a transmission  tariff within  60 days  following the            merger.  Intervenors and Commission staff proposed the filing            and  approval of  an  interim  transmission  rate.   The  ALJ            rejected  both proposals  and  instead held  that the  merger            would  be  consummated upon  the  filing  of NU's  compliance                                         ___________            tariff.  He reasoned as follows:                      I see no  need for  requiring one  tariff                      (with potential for controversy, charges,                      collections and refunds)  to be  followed                      by  yet  another  tariff,  with  its  own                      potential for still other disputes.                         Avoiding  a  transitional period  will                      make   it   unnecessary   to  require   a                      transitional  tariff.    To achieve  this                      result, consummation of  the merger  must                      be conditioned on  the concurrent  filing                      of  a  compliance   tariff  which   fully                      reflects all of  the terms and conditions                      set out in this Initial Decision.  Such a                      condition should encourage  a prompt  and                      fair compliance filing  because NU  could                      not begin  to  reap the  merger  benefits                      without it.            53 F.E.R.C. at 65,221.  The Commission concurred:                         We    believe    the   GTC    [General                      Transmission   Conditions]  and   the  NH                      Corridor  Proposal,  as modified  herein,                      adequately    mitigate    the    merger's                      anticompetitive effects without requiring                      the adoption of the Merger Tariff.  Trial                      Staff stated that the Merger Tariff would                      make  service available  immediately upon                      approval of the merger.   We believe that                      the presiding judge accomplished the same                      result  by  allowing consummation  of the                      merger  when  NU  submits its  compliance                      filing.                         We further believe  that delaying  the                      merger's    consummation    until     the                      Commission   accepts    NU's   compliance                                         -37-                      submittal    for    filing    would    be                      inappropriate   given   the   uncertainty                      surrounding    issues   which    may   be                      challenged   and   subject   to   further                      litigation  in the  compliance proceeding                      and  given our  commitment to  act before                      the Merger Agreement's December  31, 1991                      termination date.  We believe that NU and                      PSNH are  entitled to  a prompt and  fair                      resolution  of this  proceeding.   At the                      same time the intervenors are entitled to                      have service begin as soon  as practical,                      together  with a  fair resolution  of any                      disputes raised regarding NU's compliance                      filing.  Accordingly, we believe  that it                      is in the best  interests of all  parties                      to allow NU to consummate the merger when                      it submits  its  compliance filing.    We                      shall also require  NU to begin  honoring                      such  requests  for transmission  service                      under the  GTC,  as modified  herein,  at                      that  time.    Such transmission  service                      will be  provided at  either the firm  or                      non-firm  transmission rates  proposed in                      NU's   compliance   filing,  subject   to                      refund, and  without a refund  floor.  In                      reviewing    NU's   filing    to   ensure                      compliance  with  this  Opinion, we  will                      hold  NU to a very high  standard.  As NU                      itself  states, "[i]f NU  fails to comply                      with  the  letter   or  spirit  of   such                      [Commission]  requirement,  NU  would  be                      subject to summary judgment  with respect                      to any aspect of its compliance filing."            56 F.E.R.C. at 62,025.                      Petitioners'  stated concern  is that,  by allowing            the  merger to be consummated prior to FERC's approval of the            compliance tariff, FERC did not provide a sufficient guaranty            that NU would provide transmission access that would mitigate                                         -38-            the  merger's  anticompetitive  effects.14    Petitioners  do            not, however,  seek  to unravel  the  merger.   Rather,  they            propose that any  cost shift under the  NEPOOL Agreement, see                                                                      ___            discussion in  Part III(B),  supra, be postponed  until after                                         _____            the compliance tariff is approved.  Petitioners complain that            the course chosen by FERC creates an incentive on the part of            NU  to delay  proceedings on  the compliance  tariff, thereby            maximizing  competitive  advantage.   Petitioners do  not, of            course,  point  out  that  their  proposal  would  create  an            incentive  on  their  part to  delay  final  approval of  the            compliance tariff, thereby postponing the day when the NEPOOL            cost shift will take effect.                      The ALJ and the Commission carefully considered the            alternatives before reaching their decisions.  The Commission            held that the anticompetitive effects of the merger  would be            adequately  mitigated  by  the  dual  requirements   that  NU            immediately provide  transmission access upon  the filing  of            its compliance  tariff, and  that any  fees  collected by  NU            would be subject to  refund without a refund floor.   Because            NU  accepted  these  merger conditions,  the  Commission  can            enforce NU's  promise to pay  such refunds if  the Commission            finds them to be appropriate.  See Distrigas of Massachusetts                                           ___ __________________________            Corp. v.  FERC, 737 F.2d  1208, 1225 (1st  Cir. 1984).   FERC            _____     ____                                            ____________________            14   We  note that,  at oral  argument, petitioners  conceded            that no one  had as  yet sought access  to NU's  transmission            facilities.                                         -39-            explicitly  warned NU  that  "[i]n reviewing  NU's filing  to            ensure compliance with  this Opinion,  we will hold  NU to  a            very high standard."  56 F.E.R.C. at 62,025.                      The Commission balanced the merging companies' need            for a "prompt  and fair resolution" of  the merger proceeding            against the intervenors' need "to have [transmission] service            begin  as soon as practical,  together with a fair resolution            of any disputes raised  regarding NU's compliance filing." 56            F.E.R.C.  at 62,025.    An  agency's  discretion  is  at  its            "zenith" when  it fashions remedies to  effectuate the charge            entrusted to it by Congress.   Niagra Power Corp. v. FPC, 379                                           __________________    ___            F.2d 153,  159 (D.C. Cir.  1967).  See also,  Consolo v. FMC,                                               ___ ____   _______    ___            383 U.S.  607, 620-21  (1966); Environmental Action,  Inc. v.                                           ___________________________            FERC, 939 F.2d 1057, 1064 (D.C. Cir. 1991); Boston Edison Co.            ____                                        _________________            v. FERC,  856 F.2d 361,  371 (1st Cir.  1988).  We  hold that               ____            FERC's exercise  of its  discretion was not  inappropriate in            these  circumstances.   FERC  did not  defer, as  petitioners            suggest,  consideration of the anticompetitive effects of the            merger  which  FERC  itself   identified.    The   Commission            recognized the effects, and dealt with them in a reasoned way            which  balanced  the  competing  interests  of  all  parties.            FERC's remedy  is not  unreasonable, and we  therefore affirm            its order.                 D.   Protection of Native Load Customers.                 D.   Protection of Native Load Customers.                      1.   Priority of Services.                           ____________________                                         -40-                           a.   Background.                                __________                      In its  merger  application, NU  made  a  voluntary            commitment   to   provide  wholesale   transmission  service,            including third  party wheeling  service,15  for any  utility            over  its existing transmission system.  At the same time, NU            sought  to limit  this  obligation by  reserving an  absolute            priority  for  power  purchases  on  behalf  of  native  load            customers (whose  power  needs NU  is bound  by franchise  or            contract  to  meet).   The  ALJ  held  that  although NU  may            reasonably give  native load service  priority over  wheeling            service if NU's transmission system had insufficient capacity            to serve both, 53  F.E.R.C. at 65,221-222, NU could  not deny            firm  wheeling   requests  based  upon  the   reservation  of            transmission  capacity for  its  own non-firm  sales, id.  at                                                                  ___            65,225.                        In Opinion  No.  364, the  Commission balanced  the            interests of  native load customers and  third party wheeling            customers  and  affirmed  the  ALJ's denial  of  an  absolute            priority:                      we  .  . .  deny  NU's  proposal to  give                      higher priority to  its own non-firm  use                      than  to third  party  requests for  firm                      wheeling    in     allocating    existing                      transmission  capacity.    In  no  event,                      however, will  NU be required  to provide                      firm third party wheeling service  out of                      existing   transmission   facilities   if                                            ____________________            15   For a definition of "wheeling" see n.9, supra.                                                ___      _____                                         -41-                      reliability  of  service  to native  load                      customers would be adversely affected.            56  F.E.R.C. at  62,021 (footnote  omitted).   The Commission            found it "reasonable to allow NU to reserve firm transmission            capacity  to  provide reliable  service  to  its native  load                                  ________            customers."  Id. (Emphasis in original.)                         ___                      On rehearing,  NU asked the  Commission to  clarify            the  scope of  the "reliability"  criterion.   The Commission            "reiterate[d] that under no circumstances will NU be required            to provide firm wheeling service out of existing transmission            capacity where  doing so would impair  or degrade reliability            of  service to native load customers."  58 F.E.R.C. at 61,199            (emphasis  removed).   The  Commission  held  the concept  of            reliability generally  encompasses the:   (1) reservation  of            transmission capacity to back  up large generating units; (2)            provision of generation reserves; and (3) coverage of certain            future  needs.     As  to  the  coverage   of  future  demand            requirements, the Commission  specifically ordered that  "any            capacity needed for reliability purposes  within a reasonable            planning horizon  must be offered  for wheeling use  until NU            expects  to need the capacity  for reliability reasons."  Id.                                                                      ___            at 61,199-200.                      Petitioners assert  that the  decision to accord  a            priority to native load  over transmission load is arbitrary,            discriminatory, and  anticompetitive.   They argue  that FERC            neither  defined  nor  justified  the   priority  granted  by                                         -42-            allowing reservation of transmission capacity for native load            service  and  that  any  such  priority  creates  competitive            advantages for  NU.  We  hold that the  Commission adequately            defined and reasonably justified its decision to allow such a            reservation  and  properly   addressed  the   anticompetitive            concerns raised by the intervenors.                             b.   Discussion.                                __________                      Although the Commission reaffirmed the general rule            that  firm transmission service  should be  accorded priority            over  non-firm  service, even  if  the  latter would  benefit            native load,    it nonetheless  allowed  NU to  reserve  firm            transmission capacity  needed to ensure reliability of native            load  service and allowed the  use of this  capacity for non-            firm transactions.  58 F.E.R.C. at 61,196.  Thus, native load            service will receive  a "priority" over third-party  wheeling            service  in  allocating existing  transmission  capacity when            reliability  of service  to  native load  would be  adversely            affected.     The  Commission  specifically   qualified  this            priority by requiring NU  to offer the capacity  for wheeling            use until NU needed  it to assure reliability to  native load            customers.                      There  is nothing arbitrary or discriminatory about            FERC's decision.  It struck  a reasonable balance between the            competing interests of native load customers and  third-party            wheeling customers.  NU-PSNH is obligated to serve its native                                         -43-            load  customers.  In return for this obligation to serve, the            native load customers regularly bear the cost of transmission            facilities;  native load  customers pay  for them,  use them,            plan  on them, and rely on them.   As the ALJ noted, "[e]very            New England utility favors  its own native load.   Nothing in            the NEPOOL agreement requires  its members to surrender their            native load preference, and none do."  53 F.E.R.C. at 65,222.            Thus,  "NU should be allowed  to give priority  over safe and            reliable service to its  native load customers using existing            transmission capacity  built to  serve those customers."   58            F.E.R.C. at  61,199.   FERC explicitly defined  and justified            the challenged native load "priority."                      2.   Transmission Upgrades Pricing.                           ______________________________                           a.   Background.                                __________                      NU's commitment to provide third-party transmission            service   includes   the  obligation   to   build  additional            transmission facilities as necessary to  relieve transmission            constraints on  its system.   58  F.E.R.C.  at 61,204-10;  56            F.E.R.C. at 62,021-24.   The issue  then becomes, how  should            the  cost  of  constructing  such  transmission  upgrades  be            allocated.  The ALJ stated  that questions of cost allocation            are  best  addressed  in  future  proceedings  regarding  the            particular   responsibilities   for  particular   facilities.            Nevertheless,  the ALJ  adopted  the "but  for" analysis  for            determining responsibility proposed by NU witness Schultheis:                                         -44-                      [W]heeling customers must make a pro rata                      contribution   whenever  the   facilities                      would  not have been  needed but  for the                      wheeling  transfers across  a constrained                      interface.   This means that  NU's native                      load customers pay for the new facilities                      they  create  the need  for  and wheeling                      customers  pay  for  the facilities  they                      create the need for.            53 F.E.R.C. at 65,223.  The ALJ also noted that the financial            exposure of  transmission customers  was limited by  the cost            caps  to  which NU  was committed.16    Id. at  65,224.   The                                                    ___            Commission agreed that cost  questions should be litigated in            the context of a specific proposal,  and accepted the concept            of  the "but for" test  as a framework  for ascertaining cost            responsibility and the  use of  the proposed cost  caps as  a            reasonable  means of  limiting  the  transmission  customers'            responsibility for  future upgrades.  56  F.E.R.C. at 62,028-            030.   The Commission reaffirmed that  decision on rehearing.            58 F.E.R.C. 61,204-207.                      Petitioners  contend that the  Commission failed to            adequately  explain  the pricing  policy  it  will employ  in            pricing  transmission upgrades.  Basically, petitioners claim            the ruling is too ambiguous to determine whether, or how, the                                            ____________________            16  NU committed  to cap  cost responsibility  to "(1)  those            specific facilities  identified  by NU  at  the time  of  the            wheeling request as needing to be built or upgraded either at            the time of the request or in the future; and (2) the maximum            dollar  amount  contained  in  NU's  initial  estimate  of  a            wheeling customer's pro  rata share  of the  costs of  future            upgrades  needed  to  accommodate   a  request  for  wheeling            service."              56 F.E.R.C. at 62,031-32.                                         -45-            Commission changed its  policy from the traditional  "rolled-            in" approach used  in pricing transmission service.   We hold            that   the  Commission   provided   a  clear   and   reasoned            justification for  the principles that will  guide its future            determinations of  transmission upgrade  pricing.  We  affirm            the Commission's decision not  to modify the basic principles            adopted in its order.                           b.   Discussion.                                __________                      In accepting as reasonable  the "but for" test, the            Commission  has  done no  more than  approve a  framework for            determining  cost responsibility  which furthers  the general            principle that  transmission costs  should be borne  by those            entities  responsible  for the  cost.    58 F.E.R.C.  61,205.            Under  this test,  incremental  cost pricing  could be  found            appropriate when firm wheeling across  a particular interface            would  degrade reliability absent  upgrades.   The Commission            specifically declined, however, to answer the requests of the            intervenors  to  decide  the "rolled-in  versus  incremental"            rate17 issue in  the abstract and  chose instead to  evaluate            it only within the  context of a particular rate  proposal or            upgrade.  Id.   The Commission articulated  how it envisioned                      ___                                            ____________________            17  Under "rolled  in" pricing principles, the upgrade  costs            would  be rolled in with  other company costs  and charged to            all ratepayers as part of NU's  general rate structure; while            administratively   simple,   it   ignores  any   concept   of            responsibility.  Thus, incremental pricing principles look to            hold parties responsible for their share of upgrade costs.                                         -46-            pricing  transmission  upgrades   and  adopted  a   condition            limiting  the  amount  NU  may  propose  to  collect  from  a            transmission customer to the greater of                       (1) the incremental  cost of new  network                      facilities  required  at  the   time  the                      customer's new transmission load is added                      or (2) the rolled-in cost of  all network                      facilities required to serve the combined                      transmission loads of [NU], including any                      required transmission additions.            Id. at 61,206.   Thus, a wheeling customer may be charged the            ___            greater of rolled-in cost rates or incremental cost rates.                         The Commission acknowledged  that the  introduction            of incremental  cost pricing  principles is a  departure from            its  traditional pricing  policies18 and  justified  this new            policy  on NU's  unprecedented  obligation  to provide  third            party transmission service.   Id.  The  Commission noted that                                          ___            incremental  cost  pricing  may  be  appropriate  in  certain            circumstances,  but  decided to  leave  the  details of  cost            responsibility  questions to  a  future specific  section 205            rate case.  When such a  case arises, NU will bear the burden            of   justifying  "any   direct  assignments   of   costs  and            support[ing] any arguments that  reliability is degraded by a            particular  firm transmission  service.    No presumption  is                                            ____________________            18     The  Commission generally  has  adhered to  rolled  in            pricing,   but  has   never  precluded   particularized  cost            allocations to  specific  customers where  appropriate.   See                                                                      ___            Utah Power & Light Co., 45 F.E.R.C.   61,095, at 61,291 n.163            ______________________            (1988);  Public Service Co. of Indiana, 51 F.E.R.C.   61,367,                     _____________________________            at 62,203 (1990).                                         -47-            created  by  NU's  `but  for' criterion  that  firm  wheeling            customers always cause the need for upgrades."  Id. at 61,207                                                            ___            (quoting 56 F.E.R.C. at 62031).   The Commission also allowed            that  any  reliance by  NU  upon the  "but  for" test  may be            challenged in  future actions.   The Commission  sufficiently            explained and  justified the  principles that will  guide its            transmission upgrade pricing.                 E.   Opportunity Cost Pricing.                 E.   Opportunity Cost Pricing.                      As has already been discussed, the Commission found            it necessary to impose a number of conditions on the proposed            NU-PSNH merger to mitigate  the merged company's market power            in the  markets for  transmission and short-term  bulk power.            58 F.E.R.C.  at 61,195.    Specifically, the  Commission held            that  NU  must  provide  firm  transmission  service  out  of            existing  capacity  for  any   utility,  subject  only  to  a            reservation  of  sufficient  capacity  to  maintain  reliable            service to its  native load customers  and to honor  existing            contractual obligations.   NU was  prohibited, however,  from            denying a request for  firm transmission service by reserving            capacity for  non-firm transactions  that would enable  it to            provide more economical service to its native load customers.            56 F.E.R.C.  at 62,014-21;  58 F.E.R.C. at 61,196-200.   FERC            also  held   that  NU  must  build   additional  transmission            facilities   as   needed   to   provide   transmission  where            insufficient capacity  exists.  56 F.E.R.C.  at 62,021-24; 58                                         -48-            F.E.R.C. at 61,204-10.   The Commission found that  these and            other conditions  would  "adequately mitigate"  the  merger's            anticompetitive effects.  58 F.E.R.C. at 61,213.                      On rehearing, NU and  the States of Connecticut and            New Hampshire  argued that the Commission  should address the            issue of  firm transmission  pricing because, in  Opinion No.            364, FERC  had established  principles governing  the related            issue of  firm transmission priority which  made NU's ability            to purchase  inexpensive power (which would lower its cost of            serving  its  native  load  customers)  subordinate  to   its            obligation  to provide  firm transmission for  third parties.            58  F.E.R.C.  at  61,201-02.    The  Commission  agreed,  but            declined  to approve  "opportunity  cost  pricing"19  outside            the  context of  a specific  tariff proposal.   Instead,  the            Commission announced three "basic  goals" to guide its future            decisions on the  pricing of firm transmission service on the            merged company's existing capacity, and left the door open to            NU  to propose  a tariff  based on  opportunity costs  or any                                            ____________________            19   As the Commission explained, opportunity costs                      are the  revenues lost or  costs incurred                      by  a  utility  in providing  third-party                      transmission  service  when  transmission                      capacity is insufficient to  satisfy both                      a  third-party  wheeling request  and the                      utility's   own   use.     For   example,                      opportunity   costs  might   include  the                      revenues lost or costs incurred because a                      utility  must  reduce its  own off-system                      purchases or sales in order to overcome a                      constraint on the [transmission] grid.            58 F.E.R.C. at 61,200-201.                                         -49-            other  methodology  that would  meet  the three  goals.   The            Commission explained its decision as follows:                        We are now confronted with the need  to                      provide   NU   with  enough   specificity                      regarding  what it  will  be  allowed  to                      propose for the  pricing of future third-                      party  wheeling  service,  so   that  the                      company  can  decide  whether to  proceed                      with the  merger.  We also  cannot ignore                      the  need  to  act  as  expeditiously  as                      possible  given the  commercial realities                      and time pressures presented in corporate                      matters subject to our  jurisdiction, and                      in  particular  the  need  to  resolve  a                      bankruptcy situation.   At the  same time                      we are confronted with the need to ensure                      an  adequate record on pricing issues and                      to   afford   all  parties   an  adequate                      opportunity to voice their objections.                        Balancing  these  respective needs,  we                      conclude  that  the  best  course  is  to                      provide guidance on  pricing issues,  but                      to defer specific  pricing issues to  the                      compliance phase of  this proceeding,  or                      to subsequent cases where  the Commission                      may consider specific  proposals from  NU                      in a concrete, factual setting and with a                      more developed record.                      . . . .                      First, the  native load customers  of the                      _________________________________________                      utility  providing  transmission  service                      _________________________________________                      should   be   held  harmless.     Second,                      _________________________________________                      transmission customers  should be charged                      _________________________________________                      the lowest reasonable cost-based rate for                      _________________________________________                      third-party transmission service.  Third,                      _________________________________________                      the pricing should prevent the collection                      _________________________________________                      of  monopoly  rents  by the  transmission                      _________________________________________                      owner and  promote efficient transmission                      _________________________________________                      decisions.      In  ruling   on  specific                      _________                      proposed  rates,  we  will balance  these                      three  goals  in light  of the  facts and                      circumstances presented at that time.               58 F.E.R.C. at 61,203 (emphasis added) (footnotes omitted).                      FERC  was careful  to  point out  that it  endorsed            opportunity cost pricing  only insofar as NU  could show that                                         -50-            it could "propose rates which  include legitimate, verifiable            opportunity costs."  Id.   The Commission warned NU  that any                                 ___            such  proposal would  be carefully  scrutinized and  would be            subject to challenge.  Id. at 61,203-04.  Specifically,  FERC                                   ___            stated that  NU would  have to  address the  following issues            should it seek recovery of opportunity costs:                      (1) whether opportunity  costs should  be                      capped by incremental expansion  costs or                      any  other  cap;   (2)  whether   current                      wheeling   and   wholesale   requirements                      customers  should be  treated differently                      from   future   wheeling  and   wholesale                      requirements    customers,    e.g.,    by                                                    ____                      receiving    "grandfather"   rights    to                      embedded cost  rates  for the  amount  of                      transmission  capacity they  already use;                      (3) how NU  will identify those customers                      responsible for growth on its  system and                      what   particular   new  facilities   are                      necessary to accommodate that growth; (4)                      whether  and how third  parties should be                      protected   from   uncertainty  regarding                      fluctuations  in  opportunity costs;  (5)                      how  the proposed rates  will prevent the                      collection of monopoly rents; and (6) how                      the  proposed  opportunity costs  will be                      verified.                         Id.    The Commission  expressly  postponed consideration  of            ___            whether opportunity cost pricing  would be inconsistent  with            nondiscriminatory  pricing  and  nondiscriminatory terms  and            conditions of  service until  those issues  were raised  in a            concrete factual context.  Id. at 61,204, n.118.                                       ___                      Petitioners claim that FERC's decision  amounted to            an arbitrary endorsement of opportunity cost pricing that was            not  supported  by evidence  in  the  record, was  inherently                                         -51-            discriminatory, and contrary to FERC's  regulation of natural            gas pipelines.   Petitioners' underlying concern  seems to be            that  when  the  issue arises  next  in  the  context of  the            Commission's  review  of NU's  compliance  tariff, FERC  will            simply approve the tariff and dismiss petitioners' objections            on the  ground that  opportunity cost pricing  principles had            already  been  endorsed  by  the  Commission.    Although  we            understand petitioners' concerns,  we believe  that they  are            misplaced and that FERC did not go as far as petitioners fear            in endorsing opportunity cost pricing.                      Petitioners will have an opportunity to contest any            compliance tariff proposed by NU.  The Commission itself laid            out a number of issues which NU would have to address were it            to  propose a tariff based on opportunity costs.  58 F.E.R.C.            at 61,203.   Only  after carefully considering  the competing            interests of providing  guidance to  NU as to  what kinds  of            tariffs it would consider, and  the need to endorse  specific            methodologies only on the  basis of a fully-developed record,            did  the Commission  decide  to outline  broad pricing  goals            which would allow  for a number of pricing  schemes including            opportunity  cost pricing.  Id.   It was  squarely within the                                        ___            Commission's  power  to defer  consideration  of petitioners'            assertions until  after NU filed  its compliance tariff.   As            the  Supreme  Court  has  held,  "[a]n  agency  enjoys  broad            discretion in determining how  to handle related yet discrete                                         -52-            issues  in  terms  of  procedures, and  priorities."    Mobil                                                                    _____            Exploration   &   Producing   Southeast,   Inc.   v.   United            _______________________________________________        ______            Distribution  Cos., 111  S.  Ct. 615,  627 (1991)  (citations            __________________            omitted).   Petitioners argue that deferral was inappropriate            in this case because  their objections went "to the  heart of            the  public interest  determination  to be  made."   Maryland                                                                 ________            People's Counsel v. FERC, 761 F.2d 768, 778 (D.C. Cir. 1985).            ________________    ____            We disagree.                      The   Commission   announced   pricing  goals   and            conditions  that   it  determined  would   keep  the   merger            consistent  with the  public  interest, and  would result  in            "just and  reasonable rates."   Until NU proposed  a specific            tariff regime, the Commission did not have a developed record            to evaluate on the  merits.  The Commission remains  free to,            and  we expect it will, invite  objections to NU's compliance            tariff from  affected parties,  and will reject  any proposed            tariff that  conflicts with its  statutory responsibility  to            approve rates  that are "just and reasonable," and to approve            mergers that are, as conditioned, "consistent with the public            interest."                 F.   Environmental Impact Statement.                 F.   Environmental Impact Statement.                      The  City of  Holyoke  Gas  &  Electric  Department            ("HG&E") alleges that FERC's refusal to examine the potential            environmental  impacts  of its  approval  of  the merger  was            arbitrary and capricious.  We disagree.                                         -53-                      The National Environmental  Policy Act of 1969,  42            U.S.C.    4321 et seq., ("NEPA") requires federal agencies to                           __ ____            consider the  potential environmental effects  of a  proposed            major  federal  action  that  may  significantly  affect  the            quality of the human environment.   Section 102(2)(C) of NEPA            states:                      The Congress authorizes and directs that,                      to the  fullest extent  possible:  . .  .                      (2) all    agencies   of    the   Federal                      Government shall                        . . . .                      (C)  include  in every  recommendation or                      report on proposals  for legislation  and                      other major Federal actions significantly                      affecting  the  quality   of  the   human                      environment, a detailed statement  by the                      responsible official on                          (i)  the  environmental  impact of  the                      proposed action,                        (ii) any  adverse environmental effects                      which  cannot  be   avoided  should   the                      proposal be implemented,                        (iii)  alternatives   to  the  proposed                      action,                        (iv)  the  relationship  between  local                      short-term uses of man's  environment and                      the maintenance and enhancement  of long-                      term productivity, and                         (v) any  irreversible and irretrievable                      commitments of resources  which would  be                      involved in the proposed action should it                      be implemented.            42  U.S.C.    4332(2)(C).   Agencies  were authorized,  under            guidelines  promulgated  by  the  Council   on  Environmental            Quality ("CEQ"), to create categorical exclusions for actions            which do not individually  or cumulatively have a significant            effect  on  the human  environment.    40  C.F.R.     1507.3,            1508.4.    FERC  adopted   such  a  category  of  exclusions,                                         -54-            including one for merger  approvals such as the one  at issue            in this case.  That regulation states in pertinent part:                      (a) General  rule.  Except  as stated  in                      paragraph (b) of this section, neither an                      environmental    assessment    nor     an                      environmental  impact  statement will  be                      prepared  for  the following  projects or                      actions:                      . . . .                        (16) Approval of actions under sections                      4(b), 203, 204, 301,  304, and 305 of the                      Federal  Power  Act relating  to issuance                      and  purchase of  securities, acquisition                      or   disposition  of   property,  merger,                      interlocking directorates, jurisdictional                      determinations and accounting orders.            18  C.F.R.    380.4(a)(16).    An  agency  need  not issue  a            "finding  of  no  significant  impact"  in  cases  concerning            matters that fall into a categorical exclusion.  40 C.F.R.               1501.3, 1501.4, 1508.13.                      CEQ  guidelines  also  required  agencies  adopting            categorical   exclusions   to   "provide  for   extraordinary            circumstances in which a normally  excluded action may have a            significant environmental effect."  40 C.F.R.   1508.4.  FERC            made such provision in its regulations:                        (b)    Exceptions     to    categorical                      exclusions. (1) In accordance with 40 CFR                      1508.4, the Commission and its staff will                      independently    evaluate   environmental                      information  supplied  in an  application                      and  in  comments by  the public.   Where                      circumstances indicate that an action may                      be a major  Federal action  significantly                      affecting  the  quality   of  the   human                      environment, the Commission:                        (i) May require an environmental report                      or    other    additional   environmental                      information, and                                          -55-                        (ii)  Will   prepare  an  environmental                      assessment  or  an  environmental  impact                      statement.                        (2) Such circumstances  may exist  when                      the action  may have an effect  on one of                      the following:                        (i) Indian lands;                        (ii) Wilderness areas;                        (iii) Wild and scenic rivers;                        (iv) Wetlands;                        (v) Units of  the National Park System,                      National   Refuges,   or  National   Fish                      Hatcheries;                        (vi)  Anadromous   fish  or  endangered                      species; or                        (vii)  Where the  environmental effects                      are uncertain.                      However, the existence of  one or more of                      the above will not  automatically require                      the submission of an environmental report                      or  the  preparation of  an environmental                      assessment  or  an  environmental  impact                      statement.            18  C.F.R.     380.4(b).20    HG&E  argues  that  the NU-PSNH            merger might  "alter mixes  of generation  in New  England by            constraining  the locations for new plants."   HG&E points to            the language of 18 C.F.R.   380.4(b)(1)(ii) in support of its            position  that FERC was  compelled, at the  least, to explain            why  it   was  not  obliged   to  perform  the   analysis  of            environmental  effects required  by  NEPA.   HG&E also  cites            FERC's  decision  in  Southern   California  Edison  Co.,  49                                  __________________________________            F.E.R.C.     61,091  (1989)   (holding  that    380.4(b)  was            triggered when approved merger would result in the dumping of                                            ____________________            20  HG&E  does  not challenge  the  validity  of  any of  the            applicable regulations cited above.                                         -56-            hundreds of tons of additional air contaminants into the most            polluted air in the United States).                      There was no evidence in the record of identifiable            environmental harms that would likely result from the NU-PSNH            merger.  The  fact that new generating  facilities might wind            up  in different locations than  would have been  the case in            the absence of  the merger does not approach in significance,            because  its  significance  is  not quantifiable,  the  known            effects of  the  merger between  Southern  California  Edison            Company  and San  Diego Gas  & Electric  Company.   Thus, the            factual  situation presented in Southern California Edison is                                            __________________________            completely distinguishable from that of this case.                      The   character  and   location   of   the   future            environmental effects of the  NU-PSNH merger are so uncertain            that  no  meaningful  environmental  review would  have  been            possible, even had  FERC made the effort.  Here, FERC was not            approving  a  regional  development  plan.    It  was  merely            approving a merger between utility companies, albeit a merger            involving  two  of  the  largest utilities  in  New  England.            Energy  demand may increase in New England over the following            decades, and the fact  of the merger may influence  how those            needs  are met.  Nevertheless, any attempt by FERC to prepare            an  EIS would  have involved  little more  than spinning  out            multiple  hypothetical  development forecasts,  with multiple            options  for   the  type,  amount  and   location  of  future                                         -57-            generating facilities.  See  Kleppe v. Sierra Club,  427 U.S.                                    ___  ______    ___________            390, 401-2 (1976).  Once concrete plans have been established            for   the   construction   of  transmission   or   generating            facilities, those  proposals will  be reviewed under  NEPA or            the applicable state environmental review procedures.                      FERC  was justified  in  deciding  that neither  an            environmental   assessment   nor   an  environmental   impact            statement was required prior to approving the NU-PSNH merger.                 G.   HG&E's "Unique" Harm.                 G.   HG&E's "Unique" Harm.                      HG&E also  contends that because it  relied on PSNH            New Hampshire  Corridor facilities for over  one-third of its            electricity supply,  it would be "uniquely  threatened" by NU            in head-to-head competition for  large, industrial loads.  To            protect    itself,   HG&E   requested   that   FERC   either:            (1) disapprove  the merger;  (2) require  the  divestiture or            restructuring of  NU's retail  business in Holyoke  (HWP); or            (3) grant  HG&E  grandfather  rights to  PSNH  New  Hampshire            Corridor transmission.  The ALJ rejected the "drastic remedy"            of divestiture of HWP, stating that it was  "wholly uncalled-            for  by anything in this record," and holding that HG&E would            be  adequately  protected by  the  conditions  to the  merger            designed   to   address   the  anticompetitive   effects   on            transmission dependent  utilities ("TDUs").   53  F.E.R.C. at            65,232.                      As the ALJ described,                                         -58-                      [t]he  Transmission  Dependent  Utilities                      (TDUs) are  "entirely dependent on  NU or                      PSNH  for  their bulk  power transmission                      needs."  These  companies (most of  which                      involve municipal ownership) are  not big                      enough  to  own  or construct  sufficient                      generation to meet their loads.  As their                      brief states, they "are physically unable                      to  engage in any  bulk power transaction                                    ___                      without using the NU or PSNH transmission                      systems.  Absent  economic access to NU's                      or  PSNH's  transmission facilities,  the                      TDU  cannot  survive  as  an  independent                      entity."   The  TDUs compete with  NU and                      PSNH in the wholesale bulk  power market;                      each   TDU,   like  NU/PSNH,   seeks  out                      attractive sources of  supply.  TDUs thus                      "are in  the  uneasy position  of  having                      their    only    source   of    essential                      transmission  service  in  the  hands  of                      their principal competitor."  These small                      companies,    uniquely    vulnerable   to                      possible  anticompetitive   conduct,  are                      entitled  to  some measure  of protective                      assurance regarding NU/PSNH's post merger                      conduct.            53  F.E.R.C. at 65,232-33.   The ALJ held  that "[a]ll rates,            terms and  conditions of NU/PSNH transmission  service to the            TDUs in effect  on this date shall . .  . be maintained after            the merger,  unless and until changes are  either agreed upon            by  the merged  company and  the TDUs,  or authorized  by the            Commission."  53 F.E.R.C. at 65,233.  In short, while finding            that  TDUs  were  "uniquely  vulnerable"  to  anticompetitive            conduct by NU-PSNH,  the ALJ  found that HG&E  had not  shown            that  it was  entitled to  protections beyond those  given to            TDUs  generally.    The  Commission agreed,  56  F.E.R.C.  at            62,049,  but bolstered the protection for TDUs ordered by the                                         -59-            ALJ by imposing the additional condition  that NU establish a            special tariff for TDUs.  Id. at 62,050.                                      ___                      HG&E  points  to  no  evidence  in  the  record  to            indicate  that it  faced anticompetitive consequences  of the            merger sufficiently  different in  character or magnitude  to            warrant greater  protections than those given  to other TDUs.            We therefore affirm the Commission's actions to protect TDUs,            which were adequately explained and supported in the record.                 H.   Modifications to the Filed Rate Schedules.                 H.   Modifications to the Filed Rate Schedules.                      The Commission analyzed the Seabrook Power Contract            and Capacity Interchange Agreements  filed by NUSCO under the            "just and reasonable"  standard of    206 of  the FPA,21  and            ordered the  following modifications to  the rate  schedules:            (1) deletion of the automatically adjusting rate of return on            equity  provision  in  the   Seabrook  Power  Contract;   (2)            reduction of the  rate of  return on equity  in the  Seabrook            Power  Contract from  13.75 percent  to 12.53  percent;22 (3)                                            ____________________            21   Section  206(a)  of  the  FPA,  16  U.S.C.     824(e)(a)            provides:                        Whenever the  Commission, after hearing                      had  upon   its   own  motion   or   upon                      complaint, shall find that any rate . . .                      collected by any public  utility . . . is                      unjust,        unreasonable,       unduly                      discriminatory   or   preferential,   the                      Commission shall determine  the just  and                      reasonable  rate . . .  to be  thereafter                      observed and in force, and shall  fix the                      same by order.            22   NUSCO did not appeal this modification.                                         -60-            North  Atlantic's decommissioning expenses under the Seabrook            Power Contract  and any subsequent changes  thereto were made            subject to  review by  the Commission;  (4) reduction  in the            rate  of return  on  equity  specified  in the  two  Capacity            Interchange Agreements  from 14.50  percent to 13.17  percent            for the period from July 27, 1990 through August 8, 1991, and            thereafter  to  12.93 percent;  and  (5)  the Seabrook  Power            Contract  could be modified  by the Commission  in the future            under the "just and reasonable" standard of   206 of the FPA,            rather than the "public  interest" standard agreed to  by the            parties.  56 F.E.R.C. at 61,993; 58 F.E.R.C. at 61,185.                      Each  of the  three parties  to the  Seabrook Power            Contract ("SPC"), NU,  PSNH and the  State of New  Hampshire,            waived  its right to file  a complaint under    206 regarding            the rates contained in the agreement.  Section 12 of  the SPC            also provided that:                      [E]ach [party] further agrees that in any                      proceeding  by the FERC under Section 206                      the  FERC  shall   not  change  the  rate                      charged under this Agreement  unless such                      rate  is found  to  be  contrary  to  the                      public interest.            NU argues  that the Commission  violated the  "Mobile-Sierra"                                                           _____________            doctrine23 when  it  modified the  SPC  in disregard  of  the            intent of the parties.                                            ____________________            23   This doctrine is based on the  companion cases of United                                                                   ______            Gas Pipe Line  Co. v. Mobile  Gas Service Co.,  350 U.S.  332            __________________    _______________________            (1956)  and FPC  v. Sierra  Pacific Power  Co., 350  U.S. 348                        ___     __________________________            (1956).                                         -61-                      Under  the  Mobile-Sierra doctrine,  the Commission                                  _____________            must respect certain private  contract rights in the exercise            of its  regulatory powers.  Parties  to a contract may:   (1)            waive  their  rights to  file  a  complaint challenging  that            contract,  and (2) restrict  the power  of the  Commission to            impose rate changes  under   206 to  cases in which it  finds            the  rates contrary to the public interest   a more difficult            standard  for  the  Commission  to meet  than  the  statutory            "unjust and  unreasonable" standard  of    206.   See  Papago                                                              ___  ______            Tribal Utility Authority  v. FERC,  723 F.2d  950, 953  (D.C.            ________________________     ____            Cir. 1983), cert. denied,  467 U.S. 1241 (1984).   In Papago,                        ____________                              ______            the court held  that, regardless of the  parties' intent, the            Commission retained, in any event,                      the indefeasible right . . . under    206                      to replace rates that are contrary to the                      public interest, "as where  [the existing                      rate   structure]    might   impair   the                      financial ability of  the public  utility                      to continue its  service, cast upon other                      consumers  an  excessive  burden,  or  be                      unduly discriminatory."            Papago, 723 F.2d at  953, (quoting Sierra, 350 U.S.  at 355).            ______                             ______            The court  went on to  note that  "unduly discriminatory"  in            this  context  "apparently  means  unduly  discriminatory  or            preferential  to  the detriment  of  purchasers  who are  not            parties to the contract."  Papago, 723 F.2d at 953 n.4.                                       ______                      In  this case,  seemingly for  the first  time, the            Commission held that it also had the                                         -62-                      authority   under  the   public  interest                      standard to  modify a contract where:  it                                                             __                      may   be  unjust,   unreasonable,  unduly                      ________________________________                      discriminatory  or  preferential  to  the                      detriment  of  purchasers  that  are  not                      parties to  the contract;  it is  not the                                                 ______________                      result  of arm's length bargaining; or it                      _________________________________________                      reflects  circumstances where  the seller                      _________________________________________                      has  exercised  market  power   over  the                      _________________________________________                      purchaser.                      _________            50  F.E.R.C. at 61,839 (emphasis added).  The ALJ interpreted            that holding as follows:                      The  Commission  made clear  that  in the                      particular circumstances  surrounding the                      Seabrook  contract,  it  retains power                         through the "public interest"  language                        to    make   modifications    under   the                      traditional   just  and   reasonable  and                      nondiscrimination standards.            53 F.E.R.C.  at  65,235.   The  standard established  by  the            Commission, and  subsequently applied by  the ALJ,  conflates            the  "just and  reasonable" and "public  interest" standards,            thereby  circumventing  the  Mobile-Sierra  doctrine.     The                                         _____________            distinction  between the  "just and  reasonable" and  "public            interest"  standards  loses  its   meaning  entirely  if  the            Commission may  modify a  contract under the  public interest            standard  where it  finds  the contract  "may be  unjust [or]            unreasonable."   The  parties'  express intent  was to  avoid            review  of  rate  schedules  under the  just  and  reasonable            standard.    Mobile-Sierra protects  their  right  to do  so,                         _____________            leaving the Commission  with the power  to modify rates  only            when required by the public interest.                                         -63-                      The  Commission  found that  the  SPC  might unduly            discriminate  against entities not  parties to  the contract,            and that there was no genuine arm's-length bargaining because            NU and PSNH negotiated the agreement at a time when they knew            they were about to  merge and have identical interests.   The            Commission held  that, in  this context, it  could "carefully            scrutinize the  rates, terms and conditions  of the contract"            to determine if they were just.  Id.                                             ___                      The Commission's  explanation for employing  a just            and  reasonable  standard seems  to  us inadequate.    To the            extent  the  Commission   is  relying  on   NU's  prospective            ownership of PSNH, it is unclear why the Commission should be            concerned    about   protecting   PSNH   from   a   perceived            disadvantageous arrangement imposed by its  prospective owner            since any disadvantage visited on  the prospective subsidiary            will be borne by its owner.  If NU chooses  to allocate risks            among its operating subsidiaries  and one of its subsidiaries            is  disfavored in  this calculation,  there would seem  to be            little justification for the Commission stepping in on behalf            of the disfavored subsidiary absent some threat to the public            interest.                      As for the seller's  market power, reliance on this            factor  threatens  to  erode  the  Mobile-Sierra doctrine  so                                               _____________            substantially that  a fuller explanation  from the Commission            is required before  proceeding down this  route.  After  all,                                         -64-            some  measure of  market power  could be  present in  a large            number  of  contracts.    A  case-by-case  inquiry  into  the            presence  and extent of market  power would inject  a new and            potentially  time-consuming  element  into the  Mobile-Sierra                                                            _____________            analysis, and it is not entirely  clear in any event why  the            Commission should protect a buyer who voluntarily enters into            an agreement with a dominant seller.                      The  most attractive case  for affording additional            protection, despite  the presence of a contract, is where the            protection is  intended to  safeguard the interests  of third            parties,  notably the  buyer's customers.   The Mobile-Sierra                                                            _____________            doctrine itself allows  for intervention by FERC  where it is            shown  that the  interests of  third parties  are threatened.            Mobile,  350  U.S.  at  344-45;  Sierra,  350  U.S.  at  355.            ______                           ______            However, the  standard to be  applied, as  formulated by  the            Supreme  Court, is  the  protection of  outside parties  from            "undu[e] discriminat[ion]"  or  imposition of  an  "excessive            burden."  Sierra,  350 U.S. at 355.  If  there is some reason                      ______            for departing from this public interest standard as framed by            the Supreme Court, the Commission has not supplied it.                      We  assume, without  deciding, that:   (1)  FERC is            correct  in its assertion that the State of New Hampshire did            not adequately represent the  interests of non-parties to the            contract,  and  that,  therefore,  the SPC  may  have  unduly            discriminated  against those non-parties; and (2) the alleged                                         -65-            lack of arms'-length bargaining among NU,  PSNH and the State            of  New Hampshire gave  the Commission the  right to evaluate            the SPC.  We hold, however,  that the Commission was bound to            follow  the Mobile-Sierra  doctrine as explicated  by Papago,                        _____________                             ______            and therefore should have evaluated  the SPC under the public            interest standard, not the just and reasonable standard.                      We  therefore remand this issue for reconsideration                                    ______            by FERC under the public interest standard.24            IV.  SUMMARY.            IV.  SUMMARY.                      We affirm  the Commission's orders in  all respects                      We affirm  the Commission's orders in  all respects                      ___________________________________________________            with the exception of its modifications of the Seabrook Power            with the exception of its modifications of the Seabrook Power            _____________________________________________________________            Contract filed with the merger  proposal which we remand  for            Contract filed with the merger  proposal which we remand  for            _____________________________________________________________            consideration under the public interest standard.                            UNITED STATES COURT OF APPEALS            consideration under the public interest standard.            _________________________________________________                                FOR THE FIRST CIRCUIT                                 ____________________            No. 92-1165                        NORTHEAST UTILITIES SERVICE COMPANY,                                      Petitioner,                                            ____________________            24   We have considered, but find unpersuasive, NU's argument            that FERC  committed error  when it disrupted  the bankruptcy            settlement by modifying the Capacity Interchange Agreements.                                         -66-                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________            No. 92-1261                    VERMONT DEPARTMENT OF PUBLIC SERVICE, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________            No. 92-1262             MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY, ET AL.,                                         -67-                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________                                         -68-            No. 92-1263              TOWNS OF CONCORD, NORWOOD AND WELLESLEY, MASSACHUSETTS, ET            AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                ______________________            No. 92-1264                           CENTRAL MAINE POWER CO., ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                         -69-                                     Respondents.                                 ____________________            No. 92-1316                     CITY OF HOLYOKE GAS & ELECTRIC DEPARTMENT,                                      Petitioner,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________                                         -70-            No. 92-1328                           CANAL ELECTRIC COMPANY, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________            No. 92-1336                     THE AMERICAN PAPER INSTITUTE, INC., ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                         -71-                                     Respondents.                                  __________________            No. 92-1340                            BOSTON EDISON COMPANY, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________                                         -72-            No. 92-1510                    VERMONT DEPARTMENT OF PUBLIC SERVICE, ET AL.,                                     Petitioners,                                          v.                    FEDERAL ENERGY REGULATORY COMMISSION, ET AL.,                                     Respondents.                                 ____________________                          PETITIONS FOR REVIEW OF ORDERS OF                        THE FEDERAL ENERGY REGULATORY COMMISSION                                 ____________________                                        Before                               Torruella, Circuit Judge,                                          _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Boudin, Circuit Judge.                                          _____________                                 ____________________                                         -73-                 Gerald  M. Amero,  with  whom Catherine  R. Connors  and                 ________________              _____________________            Pierce, Atwood, Scribner, Allen, Smith & Lancaster and Arthur            __________________________________________________     ______            W.  Adelberg, and Anne M. Pare, were on brief, for petitioner            ____________      ____________            Central Maine Power Company.                 Harvey  L.  Reiter,  with  whom   William  I.  Harkaway,                 __________________                _____________________            Kathleen L. Mazure, and McCarthy, Sweeney & Harkaway, were on            __________________      ____________________________            brief, for petitioners Vermont Department of Public  Service,            Vermont  Public Service Board, Rhode Island Attorney General,            Rhode Island Division of Public Utilities and Carriers, Maine            Public Utilities Commission  and Massachusetts Department  of            Public Utilities.                 George H. Williams, Jr., with whom Morley Caskin, was on                 _______________________            _____________            brief, for petitioners  Canal Electric Company,  Commonwealth            Electric Company and Cambridge Electric Light Company.                 J.A. Bouknight, Jr., with whom David B. Raskin, David L.                 ___________________            _______________  ________            Schwartz,  and Newman & Holtzinger,  P.C., and Robert P. Wax,            ________       __________________________      _____________            General  Counsel, were  on  brief,  for petitioner  Northeast            Utilities Service Company.                 Randolph Elliott, with whom William S. Scherman, General                 ________________            ___________________            Counsel, Jerome M. Feit, Solicitor, Katherine  Waldbauer, and                     ______________             ____________________            Eric  Christensen,  were  on  brief,  for  respondent Federal            _________________            Energy Regulatory Commission.                                 ____________________                                         -74-                 Alan  J.  Roth,  Scott  H. Strauss,  William  S.  Huang,                 ______________   _________________   ___________________            Spiegel &  McDiarmid, Nicholas  J. Scobbo, Ferriter,  Scobbo,            ____________________  ___________________  __________________            Sikora,  Caruso &  Rodophele, Wallace  L. Duncan  and Duncan,            ____________________________  __________________      _______            Weinberg,  Miller   &  Pembroke,  on  brief   for  petitioner            _______________________________            Massachusetts Municipal Wholesale Electric Company.                 Charles  F.  Wheatley,  Jr.,  Peter  A.   Goldsmith  and                 ___________________________   _____________________            Wheatley  &  Ranquist,  on  brief for  petitioners  Towns  of            _____________________            Concord, Norwood &                  David J.  Bardin, Noreen  M. Lavan, Eugene  J. Meitgher,                 ________________  ________________  ___________________            Steven  R. Miles, and Arent, Fox, Kintner, Plotkin & Kahn, on            ________________      ___________________________________            brief  for   petitioner  City  of  Holyoke   Gas  &  Electric            Department.                 James T.  McManus, Michael E. Small,  Wright & Talisman,                 _________________  ________________   __________________            P.C. and  Frederick S.  Samp, General  Counsel, on  brief for            ____      __________________            petitioner Bangor Hydro-Electric Co.                 Steven  Halpern  on brief  for  petitioner Massachusetts                 _______________            Department of Public Utilities.                 Alan  H. Richardson  on  brief  for petitioner  American                 ___________________            Public Power Association.                 Mitchell Tennenbaum, Senior Staff Attorney, on brief for                 ___________________            petitioner Maine Public Utilities Commission.                 Edward  G. Bohlen, Assistant Attorney General, and Scott                 _________________                                  _____            Harshbarger,  Attorney  General,  on  brief   for  petitioner            ___________            Massachusetts Attorney General.                                         -75-                 Julio Mazzoli, Special  Assistant, and James  E. O'Neil,                 _____________                          ________________            Attorney  General,  on  brief  for  petitioner  Rhode  Island            Division of  Public Utilities  and Carriers and  Rhode Island            Office of Attorney General.                 Robert  F.  Shapiro, Lynn  N.  Hargis  and Chadbourne  &                 ___________________  ________________      _____________            Parke, on brief for  petitioner The American Paper Institute,            _____            Inc.                 Wayne R.  Frigard on brief for  petitioner Boston Edison                 _________________            Company.                 George M. Knapp, Roger B. Wagner, David A. Fazzone, John                 _______________  _______________  ________________  ____            F.  Smitka,  and  McDermott,  Will  &  Emery,  on  brief  for            __________        __________________________            petitioner Montaup Electric Company.                 Robert  S.  Golden,  Jr.,  Assistant  Attorney  General,                 ________________________            Richard Blumenthal, Attorney General, and Howard E.  Shapiro,            __________________                        __________________            Special Assistant  Attorney General, and Van  Ness, Feldman &                                                     ____________________            Curtis,  on brief  for intervenor  Connecticut  Department of            ______            Public Utility Control.                 Kenneth  M. Simon,  Larry F.  Eisenstat, and  Dickstein,                 _________________   ___________________       __________            Shapiro & Morin, on brief for intervenor Masspower.            _______________                 Harold T. Judd, Senior Assistant Attorney  General, John                 ______________                                      ____            P. Arnold,  Attorney General, Glen  L. Ortman, John  S. Moot,            _________                     _______________  _____________            and Verner, Liipfert,  Bernhard, McPherson and  Hand, Chrtd.,                ________________________________________________________            on brief for intervenors  The State of New Hampshire  and New            Hampshire Public Utilities Commission.                                         -76-                 Kenneth D. Brown on  brief for intervenor Public Service                 ________________            Electric and Gas Company.                 Edward Berlin, Kenneth G.  Jaffee, Martin W. Gitlin, and                 _____________  __________________  ________________            Swidler  &  Berlin,  and  Cynthia  A.  Arcate,  on  brief for            __________________        ___________________            intervenor New England Power Company.                                 ____________________                                 ____________________                                         -77-                      BOWNES, Senior Circuit Judge.   These petitions for                      BOWNES, Senior Circuit Judge.                              ____________________            review  challenge the Federal  Energy Regulatory Commission's            ("FERC"  or  "the   Commission")  decision  to  conditionally            approve  the merger  of  Northeast Utilities  ("NU") and  the            Public Service  Company of  New Hampshire ("PSNH").   Certain            joint petitioners  and intervenors25 contend that  FERC erred            when it:  (1) held that the benefits of the merger outweighed            its costs; and  (2) failed  to condition the  merger on  NU's            waiver  of  single  participant  status ("SPS")  in  the  New            England Power Pool ("NEPOOL").  A group of public and private            electric  utilities,  state   commissions,  state   agencies,            independent  power producers,  cogenerators and  electric end            users26  claim  that FERC  erred when  it:   (1)  allowed the            consummation of  the merger upon  the filing of,  rather than            upon   approval  of,   a  transmission   tariff;  (2) adopted                                            ____________________            25     Joint petitioners  and intervenors  include:   Central            Maine  Power Company;  Boston Edison  Company; Bangor  Hydro-            Electric  Company;   the  Towns  of   Concord,  Norwood   and            Wellesley, Massachusetts; Maine Public  Utilities Commission;            Massachusetts   Department   of  Public   Utilities;  Vermont            Department of Public  Service; Vermont Public Service  Board;            Rhode  Island Attorney  General;  Rhode  Island  Division  of            Public  Utilities  and   Carriers;  Massachusetts   Municipal            Wholesale  Electric  Company;  and,  City of  Holyoke  Gas  &            Electric Department.            26   This  group of petitioners and intervenors  includes the            joint petitioners and intervenors  listed in n.1, supra (with                                                              _____            the  exception of  Central Maine  Power Company),  and:   The            American  Paper  Institute,   Inc.;  American  Public   Power            Association;  Canal  Electric Company;  Commonwealth Electric            Company;  Cambridge  Electric  Light  Company;  Massachusetts            Attorney General; and, Montaup Electric Company.                                         -6-            transmission   access  conditions  that  gave  "native  load"            customers  a priority over  other customers; and (3) endorsed            "opportunity  cost" pricing  principles.   The Holyoke  Gas &            Electric Department ("Holyoke")  argues that FERC  erred when            it  failed  to:   (1) conduct  an  appropriate review  of the            environmental impact  of the  proposed merger; and,  (2) make            findings    regarding    allegations    of    anticompetitive            consequences  of  the merger  that  were  unique to  Holyoke.            Finally,  Northeast  Utilities   Service  Company   ("NUSCO")            asserts that FERC's orders  changing the terms of  three rate            schedules  filed in  conjunction with its  merger application            were arbitrary, capricious, and an abuse of discretion.                      For   the   reasons   which   follow,   we   reject            petitioners' arguments and affirm the  Commission's decisions            with the exception of the Commission's decision to change the            terms  of the  Seabrook Power  Contract which  we  remand for            consideration under the "public interest" standard.            I.   BACKGROUND.            I.   BACKGROUND.                 A.   Parties to the Approved Merger.                 A.   Parties to the Approved Merger.                      Northeast  Utilities ("NU") is a registered holding            company under the Public Utility Holding Company  Act of 1935            (PUHCA).  15 U.S.C.   79 et seq. (1988).  Northeast Utilities                                     __ ____            Service Company ("NUSCO") is  a service company subsidiary of                                         -7-            NU   and  supplies  centralized  administrative  and  support            services to NU's operating companies.27                      Prior to the merger,  Public Service Company of New            Hampshire ("PSNH")  was the  largest electric utility  in New            Hampshire, supplying  electric service to some 375,000 retail            customers,  approximately  three-quarters   of  the   State's            population, in every county in the State.  PSNH also provided            wholesale service to the New  Hampshire Electric Cooperative,            three  New Hampshire  municipalities, and  one investor-owned            utility,  Vermont  Electric  Power  Company.   PSNH  had  the            largest  ownership  share,  approximately  35.6  percent,  of            Seabrook Unit  No. 1, a nuclear  generating facility declared            to be available for service on June 30, 1990.                 B.   The Merger Proposal.                 B.   The Merger Proposal.                      On  January  28,  1988,  PSNH   filed  a  voluntary            petition  in  the  United  States Bankruptcy  Court  for  the            District of New Hampshire for reorganization under Chapter 11            of  the Bankruptcy Code.   11 U.S.C.    1101 et  seq. (1988).                                                         __  ____            PSNH  alleged that it was unable to  recover in its rates the            outlays  it had made in the construction and operation of the            Seabrook  nuclear power  plant.   On  April  20, 1990,  after                                            ____________________            27   NU's operating companies are Connecticut Light and Power            Company  (CL&P),  Western  Massachusetts   Electric  Company,            Holyoke  Water  Power  Company (HWP)  and  HWP's wholly-owned            subsidiary, Holyoke Power and Electric Company (HP&E).  These            companies are wholly-owned subsidiaries  of NU and are public            utilities supplying retail and wholesale electric service  in            Connecticut and Massachusetts.                                         -8-            sifting through several  competing reorganization plans,  the            bankruptcy court  approved NU's  proposal to merge  with PSNH            and to  acquire and operate  all of PSNH's  power facilities.            See In re Public Service Co. of New Hampshire, 963  F.2d 469,            ___ _________________________________________            470 (1st Cir.), cert.  denied, Rochman v. Northeast Utilities                            _____  ______  _______    ___________________            Service Co., 113 S. Ct. 304 (1992).            ___________                      NU's proposal contained a two-step process:  first,            PSNH would  emerge from  bankruptcy as a  stand-alone company            bound  to a merger agreement  with NU; second,  PSNH would be            merged  with   an  NU  subsidiary  created   solely  for  the            acquisition (NU Acquisition Corporation), with  PSNH emerging            as  the surviving entity.  After  the merger, PSNH would be a            wholly-owned  subsidiary   of  NU  and  would   transfer  its            ownership  interest   in  Seabrook  to  a   newly  formed  NU            subsidiary,   North   Atlantic  Energy   Corporation  ("North            Atlantic").    The second  step  would occur  only  after all            necessary  approvals   were   received  from   the   relevant            regulatory agencies.                 C.   Procedural History.                 C.   Procedural History.                      On January 8, 1990, NUSCO, on behalf of NU and NU's            operating subsidiaries, filed an  application with FERC under            section 203 of  the Federal  Power Act ("FPA"),  16 U.S.C.               824b (1988), seeking authorization for PSNH to dispose of all            of its  jurisdictional facilities and  concurrently to  merge            with, and become  a subsidiary  of, NU.   In connection  with                                         -9-            this application,  NUSCO filed four rate  schedules with FERC            pursuant  to     205   of  the  FPA:    the   Seabrook  Power            Contract,28   the  Sharing   Agreement29  and   two  Capacity            Interchange Agreements.30                      The  Commission  consolidated consideration  of the            merger  application and  rate  schedules,  accepted the  rate            schedules for  filing and suspended their  effectiveness, and            set for  hearings before an administrative  law judge ("ALJ")            the questions  of whether the  Commission should grant  the              203  application  and  approve   the  rate  schedules.    See                                                                      ___            Northeast Utilities Service Co.,  50 F.E.R.C.   61,266, reh'g            _______________________________                         _____            granted  in part  and denied  in part,  51 F.E.R.C.    61,177            _____________________________________            (1990).  In its order, the Commission directed the parties to                                            ____________________            28  The Seabrook  Power Contract is a  life-of-the-unit power            sales agreement between PSNH  and North Atlantic entered into            concurrently with  NU's acquisition of PSNH  and the transfer            of PSNH's share  of Seabrook  to North Atlantic.   Under  the            contract, PSNH  agreed  to purchase  North Atlantic's  entire            share of Seabrook capacity and  energy, according to a  cost-            of-service formula rate.  The contract was intended to ensure            that  North Atlantic would recover all of its costs from PSNH            regardless of whether or not Seabrook actually operated.            29   The Sharing Agreement allocates the benefits and obliga-            tions from the  integrated operation of PSNH and  the current            NU  system, as well as  the joint planning  and operations of            these  systems.   This  agreement established  a formula  for            sharing the  expected post-merger benefits that  would accrue            to NU and PSNH  operating companies as a result  of operating            efficiencies  and  the  ability  to take  single  participant            status under the NEPOOL agreement.            30    The two Capacity Interchange Agreements provide for the            sale  and purchase  of  energy between  PSNH and  Connecticut            Light & Power Company (CL&P) over a ten-year term.                                         -10-            address  the  effect of  the proposed  merger on  NU's market            power and "whether any transmission conditions  are necessary            to eliminate any  adverse effect of the  proposed merger and,            if  so,  what specific  conditions  should be  imposed."   50            F.E.R.C. at 61,834-35.                      On December  20, 1990,  the ALJ issued  its Initial            Decision  approving  the     203  application  and  the  rate            schedules   with   certain   modifications  and   conditions.            Northeast Utilities Service Co., 53 F.E.R.C.   63,020 (1990).            _______________________________            The Commission, in Opinion No. 364, issued on August 9, 1991,            affirmed in  part and  reversed in part  the ALJ's  decision,            conditionally approving  the    203 application and  the rate            schedules.   Northeast Utilities  Service Co., 56  F.E.R.C.                           ________________________________            61,269  (1991).    On  January 29,  1992,  after  considering            additional  filings  by  the  parties and  oral  argument  on            transmission  pricing issues,  the Commission  issued Opinion            No. 364-A,  affirming its  conditional approval of  the   203            application  and rate schedules.  Northeast Utilities Service                                              ___________________________            Co., 58 F.E.R.C.   61,070 (1992).            ___                      Petitions for review of  Opinions No. 364 and 364-A            were  filed in  this court  and in  the District  of Columbia            Circuit  Court.     The  Judicial   Panel  on   Multidistrict            Litigation  consolidated these petitions  for review  in this            court, where  further petitions for  review were  filed.   28            U.S.C.   2112(a) (1988).  Subsequently, in Opinion No. 364-B,                                         -11-            the Commission denied a request for  rehearing of Opinion No.            364-A.  Northeast Utilities Service Co., 59 F.E.R.C.   61,042                    _______________________________            (1992).  A petition for review of Opinions No. 364-A and 364-            B was filed in this court, where it was consolidated with the            earlier filed  petitions.  We review  the Commission's orders            under the jurisdiction established by 16 U.S.C.   825l.            II.  STANDARD OF REVIEW.            II.  STANDARD OF REVIEW.                      On  review,   we  give   great  deference  to   the            Commission's decision.   U.S. Dep't of Interior  v. FERC, 952                                     ______________________     ____            F.2d 538, 543  (D.C. Cir. 1992).  FERC's findings of fact are            reviewed under the "substantial evidence" standard of review.            16 U.S.C.   825l  ("The finding of  the Commission as to  the            facts,  if  supported  by  substantial  evidence,  shall   be            conclusive.").  Therefore,                      [w]e  defer  to  the agency's  expertise,                      particularly where the statute prescribes                      few specific standards  for the agency to                      follow,  so  long  as  its   decision  is                      supported  by  "substantial evidence"  in                      the  record  and  reached   by  "reasoned                      decisionmaking," including an examination                      of  the  relevant  data  and  a  reasoned                      explanation   supported   by   a   stated                      connection  between  the facts  found and                      the choice made.            Electricity  Consumers  Resource Council  v.  FERC, 747  F.2d            ________________________________________      ____            1511,  1513 (D.C. Cir. 1984).  "Pure" legal errors require no            deference  to agency  expertise,  and are  reviewed de  novo.                                                                __  ____            Questions involving an interpretation of the FPA involve a de                                                                       __            novo determination  by the court of  Congressional intent; if            ____                                         -12-            that  intent is  ambiguous,  FERC's conclusion  will only  be            rejected if  it  is unreasonable.    Chevron USA  v.  Natural                                                 ___________      _______            Resources  Defense  Council,  467  U.S.  837,  842-45 (1984);            ___________________________            Boston Edison Co. v. FERC, 856 F.2d 361, 363 (1st Cir. 1988).            _________________    ____            III. DISCUSSION.            III. DISCUSSION.                 A.   Conditional Approval of the Merger.                 A.   Conditional Approval of the Merger.                      1.   Background.                           __________                      In reaching  his  decision to  approve the  NU-PSNH            merger,  the   ALJ  found  that  the   merger  would  produce            significant benefits.  Specifically, he found that:  (1) PSNH            would emerge from bankruptcy  as a viable utility on  a solid            financial  footing,  53  F.E.R.C.  at  65,211;  (2)  improved            management techniques and economies of scale would reduce the            operating costs  of Seabrook by  some $527 million,31  id. at                                                                   ___            65,212; (3) application of NU operating procedures  to PSNH's            fossil steam plants would save  $100 million, id. at  65,213;                                                          ___            (4) reductions in  administrative and general  expenses would            save  $124  million, id.;  (5) NU's  record of  buying lower-                                 ___            priced coal on the  spot market would save $39  million, id.;                                                                     ___            and (6) the merger would yield $360 million in savings for NU            because of  its ability to elect  "single participant status"                                            ____________________            31    This,  and all  other  dollar amounts  are net  present            values unless otherwise noted.                                         -13-            in  the  New  England  Power  Pool  (NEPOOL),  a  power  pool            comprised of most of the utilities in New England.  Id.                                                                ___                      The ALJ  also found that  unless several conditions            were  imposed, the  merger  would have  short- and  long-term            anticompetitive consequences because of the  merged company's            increased market  power over  key transmission  facilities in            both  the New England region and the Rhode Island and Eastern            Massachusetts submarket ("Eastern  REMVEC").  53 F.E.R.C.  at            65,214-19.   Under the  authority of   203(b)  of the FPA, 16            U.S.C.    824b(b), the  ALJ  approved the  merger subject  to            several conditions, including the  following:  (1) the merged            company  must  offer  firm  (non-interruptible)  transmission            service  for a minimum of 30 days  and a maximum of 20 years,            53  F.E.R.C.  at  65,220-21;  (2) non-firm  service  must  be            offered  for a one-day minimum  term, id. at  65,220; (3) the                                                  ___            merger would be consummated concurrently with the filing of a            compliance tariff which fully reflects  all of the terms  and            conditions set  out in  the ALJ's  Initial  Decision, id.  at                                                                  ___            65,221;  (4) NU  must  implement its  New Hampshire  Corridor            Proposal,32 thereby  making available 400 MW  of transmission                                            ____________________            32   The New Hampshire  Corridor Transmission Proposal allows            New  England  utilities  to purchase  long-term  transmission            rights from NU-PSNH in order to connect with power sources in            northern New England and Canada.  See 53 F.E.R.C. at 65,225.                                              ___                                         -14-            capacity  for wheeling33  by utilities  in both  northern and            southern New  England, id.  at 65,225-27; and  (5) the merged                                   ___            company's veto  power on NEPOOL's  Management Committee would            be restricted for the ninety day period immediately following            consummation of the merger, id. at 65,230-31.                                        ___                      In  Opinion No.  364, the  Commission affirmed  the            ALJ's finding  that the merger, with  appropriate conditions,            was consistent  with  the public  interest.   56 F.E.R.C.  at            62,011.  It held,  however, that the $364 million  cost-shift            between NU-PSNH and other NEPOOL members should not have been            counted  as a benefit of the merger because it simply shifted            costs dollar-for-dollar  among the membership without any net            savings.34    56 F.E.R.C.  at  61,997.   The  Commission also            held  that,  in evaluating  the  costs  and benefits  of  the            merger, the ALJ  correctly attributed the benefits  resulting            from  the merger to the  merger even if  those benefits could            have been  achieved  by other  means.35   Id.  at  61,994-96.                                                      ___            This conclusion  was reiterated  on rehearing in  Opinion No.            364-A.  58 F.E.R.C. at 61,186-87.                                            ____________________            33   "Wheeling" is defined as the "transfer by direct trans-            mission or displacement [of]  electric power from one utility            to another  over the facilities of  an intermediate utility."            Otter Tail Power Co. v. U.S., 410 U.S. 366, 368 (1973).            ____________________    ____            34   This issue is discussed in Part III(B), infra.                                                         _____            35   This issue is discussed in Part III(A)(3), infra.                                                            _____                                         -15-                      Petitioners  and intervenors argue that FERC erred,            as  a matter  of law,  in holding  that  the benefits  of the            merger outweighed its costs.                                         -16-                      2.   The Statutory Standard.                           ______________________                      FERC's   authority   to    consider   the    merger            applications of utilities  is set  forth in    203(a) of  the            FPA, 16  U.S.C.   824b(a):  the Commission  "shall approve" a            proposed merger of utility facilities if, "[a]fter notice and            opportunity  for hearing, . . . the Commission finds that the            proposed disposition, consolidation, acquisition,  or control            will  be  consistent with  the public  interest."   Id.   The                                                                ___            Commission has the additional authority to grant approval for            such transactions "upon such terms and conditions as it finds            necessary   or  appropriate  to  secure  the  maintenance  of            adequate service and the  coordination in the public interest            of facilities subject to the jurisdiction of the Commission."            16 U.S.C.     824b(b).    As the  Commission  noted  when  it            reviewed the Initial Decision of the ALJ,                      [m]erger  applicants need not show that a                      positive  benefit  will  result   from  a                      proposed  merger.    The  applicant  must                      fully  disclose  all  material facts  and                      show  affirmatively  that  the merger  is                      consistent with the public interest.   It                      is  sufficient  if  the "probable  merger                      benefits  . . .  add up  to substantially                      more than the costs of the merger."            56 F.E.R.C. at  61,994 (quoting  Utah Power &  Light Co.,  47                                             _______________________            F.E.R.C.  at  61,750  (1989)  (footnotes omitted);  see  also                                                                _________            Pacific Power  & Light Co.  v. Federal Power  Commission, 111            __________________________     _________________________            F.2d  1014,  1016 (9th  Cir. 1940).    We review  the record,            therefore, to determine whether the Commission's finding that                                         -17-            the   probable   benefits   of   the  NU-PSNH   merger   were            substantially  more   than   its  costs   was  supported   by            substantial evidence.                      3.   Discussion.                           __________                      Petitioners make two claims  with regard to  FERC's            evaluation  of the costs and benefits  of the NU-PSNH merger.            First,  they  argue  that  the  Commission  should  not  have            included resolution of PSNH's bankruptcy as a  benefit of the            merger because:  (1) PSNH actually emerged from bankruptcy on            May 16, 1991, the  effective date of the  Reorganization Plan            ("RP");  and  (2) prior  to  gaining  the bankruptcy  court's            approval  of the two-step RP, PSNH  had to show that it would            be  financially  viable  as   a  stand-alone  entity  because            regulatory approval  for the  second step  of the  RP (merger            with and into NU) was not assured.  These two facts, however,            do not  imply that  it was  error for  FERC  to consider  the            "resolution of PSNH's bankruptcy" as  a benefit, indeed as  a            principal benefit, of the merger.                        It  is  true  that  PSNH, as  a  technical  matter,            "emerged" from  bankruptcy prior  to FERC's  consideration of            the proposed merger.  The ALJ and the Commission did not hold            otherwise.   The  ALJ  stated, and  the Commission  summarily            affirmed the fact that "[t]he merger is part of  a plan which                                                 __________________            enables a  reorganized PSNH to  emerge from bankruptcy."   53            F.E.R.C. at 65,211  (emphasis added); see also 56 F.E.R.C. at                                                  ___ ____                                         -18-            61,993.  Like the state regulators  who approved the two-step            merger  plan, the Commission  evaluated the plan  as a whole,            anticipating  "the merger   not  `stand alone' PSNH    as the            ultimate destiny  for the reorganized company."   53 F.E.R.C.            at 65,211.   "All parties to  the reorganization contemplated            [stand  alone]  status as  an interim  step  en route  to the            merger."  Id.   It was the entire  plan, which admittedly had                      ___            two  sequential and  severable  steps, that  allowed PSNH  to            emerge  from bankruptcy.  There is no evidence that the state            regulators would have approved a plan to allow PSNH to emerge            from bankruptcy  that included  only the first  "stand alone"            step.  Indeed, there is evidence to the contrary.                      FERC  also found that "resolving" PSNH's bankruptcy            meant  more  than  simply  the emergence  of  PSNH  from  the            protection of  bankruptcy court.   FERC held  that the  final            resolution of PSNH's bankruptcy included the treatment of its            creditors and  stockholders who stood  to lose  approximately            $250 million  in  the absence  of  the merger.    As the  ALJ            observed, the Commission "regard[s] the right of these public            bondholders as of primary importance after the consumers have            been protected."  53 F.E.R.C. at 65,211 (quoting In re Evans,                                                     _______ ___________            1 F.P.C. 511, 517  (1937) (approving an acquisition involving            the reorganization  of a bankrupt utility)).   The Commission            also held that it was  in the public interest to  approve the            creation  of a  stronger, more  viable merged  entity, rather                                         -19-            than leaving PSNH in a "weakened", "stand alone" state.  This            holding was sufficiently supported by evidence in the record.                      Petitioners also  claim that, given  the bankruptcy            court's   "feasibility   finding"  required   by   11  U.S.C.              1129(a)(11),36  the Commission  was estopped  from reaching            the  conclusion that a "stand  alone" PSNH would  be "weak."             We disagree.   The  bankruptcy court  and FERC evaluated  the            merger proposal under  different standards.   The  bankruptcy            court  was required  to determine  the likelihood  of further            liquidation or reorganization proceedings were the plan to be            approved.  FERC was obliged to determine whether the plan was            "consistent  with   the  public   interest."    It   was  not            inconsistent for FERC to find that although PSNH was  capable            of  surviving  as  a stand  alone  entity,  it  would not  be            "consistent  with the  public interest"  to prevent  a merger            that  would  result   in  an  even  stronger  utility.    The            principles of estoppel simply do not apply  in a case such as            this, where the issues litigated and the standards applied in            the two proceedings are so different.                                             ____________________            36   The Bankruptcy Code provides that:                 (a)   The   court   shall  confirm   a   plan   [of                 reorganization]  only  if   all  of  the  following                 requirements are met:                 (11) confirmation  of the plan is not  likely to be                 followed  by  the  liquidation,  or  the  need  for                 further financial reorganization, of the  debtor or                 any successor to the  debtor under the plan, unless                 such liquidation  or reorganization is  proposed in                 the plan.              11 U.S.C.   1129(a)(11).                                         -20-                      Even were petitioners correct in their asseveration            that  FERC  improperly  counted  the  resolution   of  PSNH's            bankruptcy  as a  benefit  of the  merger, "the  Commission's            error would be immaterial in light of the overwhelming excess            of other  benefits ($791  million) over  the costs  (0) still            attributable . . . to the acquisition."   City of Holyoke Gas                                                      ___________________            & Elec. Dep't v. S.E.C., 972 F.2d 358, 362 (D.C. Cir. 1992).            _____________    ______                      Second,  petitioners  argue that  FERC  erred  as a            matter  of law  in  weighing as  merger  benefits results  or            alleged  savings   that  were,  or  could   be,  achieved  by            "alternate  means."   Specifically, petitioners  contend that            FERC's   failure  to   apply  the   "alternate   means"  test            contradicted  general agency  policy  and  general  antitrust            principles.                       It is undisputed  that utilities  are "not  immune"            from antitrust laws.   Otter Tail Power Co. v. U.S., 410 U.S.                                   ____________________    ____            366,  372-75 (1973); Town  of Concord  v. Boston  Edison, 915                                 ________________     ______________            F.2d  17 (1st  Cir.  1990), cert.  denied,  111 S.  Ct.  1337                                        _____________            (1991).  At issue in this case is whether FERC is required by            statute,  or otherwise,  to  engage  in "standard"  antitrust            analysis before  passing on    203  merger applications.   In            claiming that  FERC has such an  obligation, petitioners rely            on a statute  governing agency approval of  bank mergers (the                                         -21-            "Bank  Merger  Act")  which   states  that  the  agency  with            jurisdiction over a proposed bank merger,37                      shall not approve                           (A)  any  proposed merger  transaction                      which  would result  in  a  monopoly,  or                      which  would  be  in furtherance  of  any                      combination  or conspiracy  to monopolize                      or  to attempt to monopolize the business                      of  banking in  any  part  of the  United                      States, or                         (B)   any    other   proposed   merger                      transaction whose effect  in any  section                      of  the country  may be  substantially to                      lessen  competition, or to tend to create                      a monopoly, or which in any  other manner                      would be in restraint of trade, unless it                      finds that the anticompetitive effects of                      the  proposed   transaction  are  clearly                      outweighed in the public interest  by the                      probable  effects  of the  transaction in                      meeting the convenience  and needs of the                      community to be served. . . .                      (6)   The    responsible   agency   shall                      immediately  notify the  Attorney General                      of any  approval by  it pursuant  to this                      subsection    of   a    proposed   merger                      transaction.            12 U.S.C.   1828(c)(5)-(6).   The Supreme Court, interpreting            the Bank Merger Act, has held that before a bank merger which            is  injurious to  the  public interest  may  be approved,  "a            showing [must] be made that the gain expected from the merger            cannot  reasonably be expected through other means."  U.S. v.                                                                  ____            Phillipsburg Nat. Bank & Trust Co., 399 U.S. 350, 372 (1970).            __________________________________            Petitioners claim that the language of the Bank Merger Act is            sufficiently similar to the statute governing FERC's approval                                            ____________________            37   Jurisdiction varies  depending on whether  the resulting            entity  is  a national  bank, a  state  member bank,  a state            nonmember bank, or a savings association.                                         -22-            of  proposed  mergers,  16  U.S.C.    824b(a),  because  both            contain  a "public interest" standard, to require FERC to use            the "alternate means" test which  bank regulators must use in            evaluating proposed bank mergers.  We disagree.                      As with  any matter  of statutory construction,  we            first examine the language  of the statute.  Under  16 U.S.C.              824b(a),  the  Commission  is required,  after  notice  and            opportunity  for hearing,  to  approve a  proposed merger  of            utility  facilities if  it finds  that the proposal  "will be            consistent  with  the  public interest."    That  is all  the            statute  says.  There  is no explicit  reference to antitrust            policies or principles.   There is no  evidence that Congress            sought  to  have  the  Commission  serve  as  an  enforcer of            antitrust  policy  in  conjunction  with  the  Department  of            Justice and  the Federal Trade  Commission.  The  Bank Merger            Act  reveals a  quite different  intention.   There, Congress            explicitly  set out  standards for  approval of  bank mergers            that incorporate  principles  embodied  in  the  Sherman  and            Clayton  Acts.   12  U.S.C.   1828(c)(5).   By  requiring the            reviewing  agency  to  notify  the Attorney  General  of  any            decision  to approve  a  proposed bank  merger,  12 U.S.C.               1828(c)(6),  Congress  expressed  its  desire  to  have  bank            regulators  serve as pre-screening  bodies of  mergers which,            because of their importance or character, in most  cases also            deserve the attention of the Department of Justice.                                         -23-                      The Bank  Merger Act  carries with it  the implicit            presumption that  mergers are  to be disapproved  (the agency            "shall not approve" a  bank merger "unless it finds  that the            anticompetitive  effects are clearly outweighed in the public            interest"  by   the  benefits   of  the  merger,   12  U.S.C.              1828(c)(5)).   The  FPA,  on the  other hand,  requires the            Commission to approve any merger that is "consistent with the            public  interest."     16   U.S.C.     824b(a).     Antitrust            considerations   are,   of   course,   relevant   in   FERC's            consideration of  the "public interest"  in merger proposals.            The  statute,  however,  does  not require  FERC  to  analyze            proposed mergers under the same standards that the Department            of Justice or bank regulators must apply.                      Although  the  Commission  must  include  antitrust            considerations in its public interest calculus under the FPA,            it is not  bound to use antitrust principles when they may be            inconsistent  with the  Commission's  regulatory goals.   See                                                                      ___            Otter  Tail,   410  U.S.   at   373  ("[a]lthough   antitrust            ___________            considerations  may be  relevant [in  determining  the public            interest], they are not determinative").  In Town of Concord,                                                         _______________            this  court  observed  that indiscriminate  incorporation  of            antitrust policy into utility regulation  "could undercut the            very objectives  the antitrust  laws are designed  to serve."            915  F.2d  at  22.     Therefore,  "antitrust  analysis  must            sensitively `recognize and  reflect the distinctive  economic                                         -24-            and  legal  setting' of  the regulated  industry to  which it            applies."   Id. (quoting Watson &  Brunner, Monopolization by                        ___  _______                    _________________            Regulated   "Monopolies":     The   Search  for   Substantive            _____________________________________________________________            Standards, 22 Antitrust Bull. 559, 565 (1977)).            _________                      Petitioners  may  rest  assured that  were  FERC to            approve  a merger of utilities which ran afoul of Sherman Act            or other  antitrust policies, the utilities  would be subject            to either prosecution by government officials responsible for            policing the antitrust laws,  or to suit by private  citizens            meeting the requirements  of standing.   See Otter Tail,  410                                                     ___ __________            U.S. at 374-5.                 B.   FERC's  Failure to Condition  Merger on NU's Waiver                 B.   FERC's  Failure to Condition  Merger on NU's Waiver                      of Single Participant Status.                      of Single Participant Status.                      Petitioners  argue  that  the  Commission  erred in            failing to  condition the merger on waiver  by NU and PSNH of            "single participant status" ("SPS")  in the New England Power            Pool ("NEPOOL"), thereby preventing  the imposition of a $364            million cost shift  from NU and PSNH to  the other members of            NEPOOL.                      1.   Background.                           __________                      NEPOOL is  a power  pool comprised  of most  of the            utilities in New England.  The association is governed by the            New England  Power  Pool Agreement  ("the  Agreement")  which            establishes a "comprehensive interconnection and coordination            arrangement" among  its members in order  "to achieve greater                                         -25-            reliability and economies in the  production of electricity."            Groton v.  FERC,  587  F.2d  1296,  1298  (D.C.  Cir.  1978).            ______     ____            Section  202(a)  of the  Federal  Power  Act encourages  such            voluntary  interconnection  and  coordination of  electricity            generating facilities in order to achieve economies of scale.            16  U.S.C.    824a; see  also 16  U.S.C.    824a-1 (regarding                                ___  ____            pooling  agreements).  The Agreement  was approved as a filed            rate  schedule  by  FERC's  predecessor,  the  Federal  Power            Commission.   53 F.E.R.C. at  65,213.  Under  its terms, each            member  is  required  to   supply  the  pool  with  resources            ("Capacity Responsibility") according to a formula based upon            the  relationship of the member's peak load to an estimate of            aggregate peak load of all members.                      NU  experiences its  peak load  in the  summer, and            PSNH experiences its peak load in the winter.  By aggregating            these two,  complementary, peak loads, NU-PSNH  can achieve a            lower Capacity Responsibility than would  be the case if  the            two   utilities  remained  separate.    Because  the  overall            capacity requirements of NEPOOL  will not change as  a result            of the merger, the Capacity Responsibilities of other members            must rise to  make up  for the savings  accruing to  NU-PSNH.            The  ALJ  accepted  the  "undisputed" estimate  that  "single            participant status" (SPS)  will result in a  shifting of some            $360  million in costs from  NU-PSNH to other  members of the            pool.  Id.                   ___                                         -26-                                         -27-                      2.   Discussion.                           __________                      Petitioners  offer six  arguments to  support their            claim that FERC erred  in failing to condition the  merger on            waiver of SPS by NU and PSNH.  First, petitioners  claim that            the Commission  did not  properly interpret the  provision of            the NEPOOL Agreement which  governs the election of SPS.   We            agree with  the Commission's finding that  the Agreement both            specifically allows for the election  by NU-PSNH of SPS,  and            encourages  such elections.    Section 3.1  of the  Agreement            provides in relevant part that:                      All  Entities which  are controlled  by a                      single person (such as a corporation or a                      common law business  trust) which owns at                      least seventy-five percent of  the voting                      shares   of   each  of   them   shall  be                                                      _____                      collectively   treated    as   a   single                      Participant   for    purposes   of   this                      Agreement, if they elect  such treatment.                      They are  encouraged to  do so.   Such an                      ______________________________                      election shall  be  made by  signing  the                      appropriate   form  at   the  end   of  a                      counterpart of this Agreement.            (Emphasis  supplied.)    Both  the  ALJ  and  the  Commission            interpreted section 3.1 to be  an explicit endorsement of the            election of  SPS by NU-PSNH.   The  ALJ stated that  "[i]t is            undisputed  that  NU  and   PSNH  qualify  for  such  [single            participant]  status under  the Agreement."   53  F.E.R.C. at            65,213.  The Commission  gave great weight to the  unrebutted            testimony  of  witness  Bigelow,   who  participated  in  the            negotiation of  the NEPOOL Agreement regarding  the intent of            the  original  signatories   to  the   Agreement  and   their                                         -28-            recognition  of  such  potentially  large  cost-shifts  among            NEPOOL members.  Bigelow stated:                      [W]hen  we put  NEPOOL together  20 years                      ago,  we  recognized  that  these  things                      might happen.  This is not something that                      snuck  up  on people. . . .   And  we did                      discuss  at  length  what   would  happen                      because . . . we were then coming up to a                      potential   merger   of  Boston   Edison,                      Eastern Utilities, New England Power.  It                      was recognized that these kinds of things                      could happen in the future and we spelled                      out the ground rules and  recognized that                      that would  happen when it happened.  And                      the  people   who  didn't  like   it  got                      something else for it.            53  F.E.R.C.  at 65,214.   Both  the  ALJ and  the Commission            rejected petitioners' claim on the basis of both the language            of the Agreement, and Bigelow's unrebutted testimony that not            only  had the  signatories been  aware of such  a potentially            large  savings  shift, but  that  those  utilities that  were            dissatisfied  with this risk  received additional concessions            as  compensation.    We  will not  disturb  the  Commission's            findings.                      Second,  petitioners claim  that the  Agreement, as            interpreted in  NEPOOL Power Pool Agreement,  56 F.P.C. 1562,                            ___________________________            1580 (1976), aff'd sub nom. Municipalities of Groton v. FERC,                         ______________ ________________________    ____            587 F.2d 1296 (D.C. Cir. 1978), prohibits utilities with peak            loads  in different  seasons  from  electing  SPS.    As  the            Commission  explained,  this  argument  mischaracterizes  the            Agreement and  the decision  of the Federal  Power Commission            ("FPC") in NEPOOL.                       ______                                         -29-                      The NEPOOL Agreement, as  initially filed                      and    as   approved,    allowed   single                      participant    status    for    utilities                      controlled by a single "person" owning at                      least 75 percent of the voting shares  of                      each utility.  An exception was expressly                      allowed  in the  filed agreement  for any                      Vermont  utility  which  elected   to  be                      grouped   with  Vermont   Electric  Power                      Company.  This exception was approved for                      essentially two reasons:  (1) the Vermont                      utilities  had  long  acted  as  a single                      contiguous  integrated  electric  entity;                      and (2) since  they all experienced their                      peak loads in winter,  single participant                      status would not give them a lower NEPOOL                      Capability Responsibility (and consequent                      savings).    A   broader  exception   was                      denied, however, for a group of municipal                      utilities (represented by MMWEC) that was                      not entitled to single participant status                      and  that lacked the two cited attributes                      of the  Vermont utilities.  The basis for                      the denial was that allowing  such status                      for "any group of systems, such as MMWEC,                      could   well   be   detrimental  to   the                      functioning of NEPOOL."                         The  NEPOOL  decision, thus,  does not                      stand  for  the  proposition that  single                      participant status is  available only  to                      utilities  having their peak loads in the                      same  season.    Instead,   another  way,                      indeed   the   primary   way,  in   which                      utilities  may qualify  is  if  they  are                      controlled  by  a  single person  with  a                      least 75-percent common ownership.   That                      is the basis upon  which NU and PSNH will                      presumably seek to  qualify if the merger                      is  approved.   Such status  is expressly                      allowed   under   the  NEPOOL   Agreement                      regardless of when NU and PSNH experience                      their peak loads.            56 F.E.R.C. at 61,996-97.  The reasons  offered by the FPC in            its  decision  to  grant  a  special  exception  for  Vermont            utilities seeking SPS were  not intended to be, and  are not,            conditions, in  addition to those  set out in  the Agreement,                                         -30-            which must be satisfied to elect SPS.  The FPC did not narrow            the scope of Section  3.1 to apply only to  utilities sharing            the  same peak  load  season; rather,  it  created a  special            exception to the  75 percent rule  to accommodate the  unique            situation faced by Vermont utilities.                      Third, petitioners  claim that FERC failed  to give            proper consideration  to Section  4.2 of the  Agreement, "the            interests of  other  pool members,  and  the purpose  of  the            Agreement as  a whole."  Essentially,  petitioners argue that            allowing  NU-PSNH  to  elect  SPS  would  violate  a  general            provision  of the  Agreement, which states  that participants            "shall  not . . . take  advantage of  the provisions  of this            Agreement so  as to harm another Participant  or to prejudice            the  position  of any  Participant  in  the electric  utility            business."   We  reject  this argument  for the  same reasons            expressed   by  the  Commission   in  its   decision  denying            petitioners' request for a rehearing:                      [W]e  find more  relevance in  the NEPOOL                      Agreement's   explicit   endorsement   of                      single  participant  status  than in  the                      agreement's  general  goal of  "equitable                      sharing"   and  prohibition   on  members                      "taking  advantage"  of the  agreement to                      harm  or prejudice  other  members.   The                      NEPOOL Agreement  specifically encourages                      eligible    parties   to    seek   single                      participant status;  the provisions cited                      by  the  intervenors  are   general,  not                      specific.      Construing   the   general                      consistent  with  the  specific, we  find                      single participant status for  the merged                      company  consistent   with  an  equitable                      sharing,  as  envisioned  by  the  NEPOOL                                         -31-                      Agreement, and not  violative of the  ban                      on  taking  advantage of  the agreement's                      provisions  to  harm  or prejudice  other                      members.            58 F.E.R.C. at 61,189.   We agree with FERC's  interpretation            of  the  Agreement.     The  NEPOOL  signatories   explicitly            encouraged  qualified  members  to  seek  SPS,   indeed  they            contemplated that members that merged might choose to do just            that.   We agree  with the  Commission's construction  of the            Agreement which avoids a direct conflict between Sections 3.1            and 4.2, and instead gives both provisions reasonable effect.                      Fourth, petitioners argue that failure to condition            the   merger  on   waiver  of   SPS  would   create  "serious            disincentives"   for  current   members  to   continue  their            membership  in NEPOOL,  and  that the  breakup  of NEPOOL  is            contrary to the public interest.  Petitioners imply that FERC            did not take seriously their complaints about SPS, but rather            rested its decision  not to  require a waiver  solely on  the            fact that the Agreement allowed the election of SPS.  This is            simply not so.                      The  Commission reversed  the ALJ  on the  issue of            whether SPS savings  should be  counted as a  benefit of  the            merger.   The Commission  found that  because the  cost shift            amounted  to  a  zero-sum   transaction,  with  NU  and  PSNH            benefitting and the other members burdened dollar-for-dollar,            the shift could not  be counted as a  benefit of the  merger.                                         -32-            56  F.E.R.C. at 61,997.  Thus, the Commission did not dismiss            petitioners' claims regarding SPS without thought.                      Also,  the ALJ  found,  and the  Commission agreed,            that SPS was essential to the merger, and that the merger, as            conditioned, was in the public interest.  FERC must approve a            proposed merger if it is consistent with the public interest.            16  U.S.C.    824b(a).    FERC  has  the  discretion  to  add            conditions  to a proposed  merger to  ensure that  the merger            will, taken as a whole, be in the public interest.  16 U.S.C.               824b(b).    FERC  need  not, however,  explain  why  every            condition, or failure to  establish a condition is consistent            with the public interest when considered separately and apart            from the entire transaction.  Petitioners seem to argue  that            FERC was required by law to  state why it was consistent with            the  public interest  to  follow the  explicit  terms of  the            approved fifteen  year-old  NEPOOL Agreement  rather than  to            condition  the  merger  on   waiver  of  a  membership  right            established by the Agreement.   FERC had no such  obligation.            It need not have  explained why it failed to add a particular            condition  prior to approving  a merger.   The statute simply            provides that "[t]he Commission may grant any application for            an order under this section in whole or in part and upon such            terms and conditions as it  finds necessary or appropriate to            secure the  maintenance of adequate  service and coordination            in  the   public  interest  of  facilities   subject  to  the                                         -33-            jurisdiction  of the Commission."   16 U.S.C.    824b(b).  In            this  case, the Commission  set forth a  reasonable basis for            approving the  merger as consistent with  the public interest            in light of the supplementary conditions the Commission found            necessary.   FERC  need not  have gone  further than  this to            explain  why it  failed  to place  further conditions  on the            merger.                      Fifth,   petitioners   allege   that   FERC   acted            inconsistently in  its  treatment of  the NEPOOL  Agreement's            provisions regarding  voting rights and SPS.   The Commission            adopted  a  condition limiting  the  merged company's  NEPOOL            voting  rights to  prevent PSNH  and NU  from gaining  a veto            power  in NEPOOL.  56  F.E.R.C. at 62,043-45.   FERC reasoned            that,  while   there  was   evidence  that   the  signatories            anticipated  that  large   cost-shifts  would  accompany  the            election  of SPS in merger  situations, there was no evidence            that they anticipated the  voting rights implications of such            mergers.   58 F.E.R.C.  at 61,189.   It was not,  contrary to            petitioners' argument,  inconsistent as a matter  of logic to            condition voting rights where the Agreement was silent on the            need or lack of need to do so, while failing to condition SPS            where the  Agreement explicitly favored the  election of SPS.            Furthermore, it was not  an error of law to  condition voting            rights while  leaving SPS  rights untouched.   Petitioners do            not  contest the Commission's decision to condition NU-PSNH's                                         -34-            voting  rights.    We  will uphold  whatever  conditions  the            Commission  imposes on  a proposed  merger  so long  as their            necessity is supported in the record by substantial evidence.                      Finally,  petitioners  contend that  the Commission            "failed to  explain why  burdening other NEPOOL  members with            $364 million in additional  costs with no offsetting benefits            to them is consistent  with the public interest."   In making            this argument, petitioners imply that each and every piece of            a complex package of merger agreements and conditions must be            able to  withstand "public interest"  analysis without regard            to other pieces of the package or to other conditions imposed            by  the  Commission.   Petitioners  also  imply that  if  any            individual or group is harmed by a piece of the package, that            provision is not in the public interest and must therefore be            stricken  or modified.   Both  implicit arguments  are deeply            flawed.                      In  evaluating a  transaction  such as  the one  at            issue  here, the  Commission  is required  to  find that  the            entire transaction, taken as a whole,  is consistent with the            public interest.  16 U.S.C.    824b(a).  Each element of  the            transaction  need not  benefit  every  utility or  individual            which might  be affected; rather, the  whole transaction must            be consistent with the interest of "the public."  There is no            reason  to  think  that  the interest  of  individual  NEPOOL            members is  synonymous with  the "public"  interest.  As  has                                         -35-            already been noted,  FERC may  add conditions  to a  proposed            merger before granting approval.   16 U.S.C.   824b(b).   The            statute  does  not  require,  however,  that  FERC  establish            conditions so  that every effect of an  approved merger could            withstand the "public interest" test.                      At  a less  theoretical level,  the ALJ  determined            that the NEPOOL savings  "were a vital  part of the long  and            strenuous negotiations which culminated in the resulting PSNH            reorganization plan,"  and  the particular  savings  of  $146            million   for  New   Hampshire   consumers  were   relied  on            specifically by the  State of New Hampshire in  approving the            merged company's rate package.   53 F.E.R.C. at 65,213.   The            Commission accepted this  finding of the  ALJ, while, at  the            same time, it reversed  the ALJ's decision to count  the $360            million as  a benefit of the merger.   58 F.E.R.C. at 61,997.            The fact that  the cost-shift was not a benefit to be counted            in weighing the  benefits and  costs of the  merger does  not            mean that  the election of SPS and the concomitant cost-shift            is not in  the public interest.   Election of  SPS is in  the            public interest because it is a central element of the merger            plan  which, viewed  as  a whole,  was  found by  FERC  to be            consistent  with  the public  interest  based  on substantial            evidence in the record.  We approve the Commission's decision            not to condition the merger on waiver by NU of SPS.                 C.   Timing of Merger's Consummation.                 C.   Timing of Merger's Consummation.                                         -36-                      In  the  proceedings before  the  ALJ,  NU proposed            filing  a transmission  tariff within  60 days  following the            merger.  Intervenors and Commission staff proposed the filing            and  approval of  an  interim  transmission  rate.   The  ALJ            rejected  both proposals  and  instead held  that the  merger            would  be  consummated upon  the  filing  of NU's  compliance                                         ___________            tariff.  He reasoned as follows:                      I see no  need for  requiring one  tariff                      (with potential for controversy, charges,                      collections and refunds)  to be  followed                      by  yet  another  tariff,  with  its  own                      potential for still other disputes.                         Avoiding  a  transitional period  will                      make   it   unnecessary   to  require   a                      transitional  tariff.    To achieve  this                      result, consummation of  the merger  must                      be conditioned on  the concurrent  filing                      of  a  compliance   tariff  which   fully                      reflects all of  the terms and conditions                      set out in this Initial Decision.  Such a                      condition should encourage  a prompt  and                      fair compliance filing  because NU  could                      not begin  to  reap the  merger  benefits                      without it.            53 F.E.R.C. at 65,221.  The Commission concurred:                         We    believe    the   GTC    [General                      Transmission   Conditions]  and   the  NH                      Corridor  Proposal,  as modified  herein,                      adequately    mitigate    the    merger's                      anticompetitive effects without requiring                      the adoption of the Merger Tariff.  Trial                      Staff stated that the Merger Tariff would                      make  service available  immediately upon                      approval of the merger.   We believe that                      the presiding judge accomplished the same                      result  by  allowing consummation  of the                      merger  when  NU  submits its  compliance                      filing.                         We further believe  that delaying  the                      merger's    consummation    until     the                      Commission   accepts    NU's   compliance                                         -37-                      submittal    for    filing    would    be                      inappropriate   given   the   uncertainty                      surrounding    issues   which    may   be                      challenged   and   subject   to   further                      litigation  in the  compliance proceeding                      and  given our  commitment to  act before                      the Merger Agreement's December  31, 1991                      termination date.  We believe that NU and                      PSNH are  entitled to  a prompt and  fair                      resolution  of this  proceeding.   At the                      same time the intervenors are entitled to                      have service begin as soon  as practical,                      together  with a  fair resolution  of any                      disputes raised regarding NU's compliance                      filing.  Accordingly, we believe  that it                      is in the best  interests of all  parties                      to allow NU to consummate the merger when                      it submits  its  compliance filing.    We                      shall also require  NU to begin  honoring                      such  requests  for transmission  service                      under the  GTC,  as modified  herein,  at                      that  time.    Such transmission  service                      will be  provided at  either the firm  or                      non-firm  transmission rates  proposed in                      NU's   compliance   filing,  subject   to                      refund, and  without a refund  floor.  In                      reviewing    NU's   filing    to   ensure                      compliance  with  this  Opinion, we  will                      hold  NU to a very high  standard.  As NU                      itself  states, "[i]f NU  fails to comply                      with  the  letter   or  spirit  of   such                      [Commission]  requirement,  NU  would  be                      subject to summary judgment  with respect                      to any aspect of its compliance filing."            56 F.E.R.C. at 62,025.                      Petitioners'  stated concern  is that,  by allowing            the  merger to be consummated prior to FERC's approval of the            compliance tariff, FERC did not provide a sufficient guaranty            that NU would provide transmission access that would mitigate                                         -38-            the  merger's  anticompetitive  effects.38    Petitioners  do            not, however,  seek  to unravel  the  merger.   Rather,  they            propose that any  cost shift under the  NEPOOL Agreement, see                                                                      ___            discussion in  Part III(B),  supra, be postponed  until after                                         _____            the compliance tariff is approved.  Petitioners complain that            the course chosen by FERC creates an incentive on the part of            NU  to delay  proceedings on  the compliance  tariff, thereby            maximizing  competitive  advantage.   Petitioners do  not, of            course,  point  out  that  their  proposal  would  create  an            incentive  on  their  part to  delay  final  approval of  the            compliance tariff, thereby postponing the day when the NEPOOL            cost shift will take effect.                      The ALJ and the Commission carefully considered the            alternatives before reaching their decisions.  The Commission            held that the anticompetitive effects of the merger  would be            adequately  mitigated  by  the  dual  requirements   that  NU            immediately provide  transmission access upon  the filing  of            its compliance  tariff, and  that any  fees  collected by  NU            would be subject to  refund without a refund floor.   Because            NU  accepted  these  merger conditions,  the  Commission  can            enforce NU's  promise to pay  such refunds if  the Commission            finds them to be appropriate.  See Distrigas of Massachusetts                                           ___ __________________________            Corp. v.  FERC, 737 F.2d  1208, 1225 (1st  Cir. 1984).   FERC            _____     ____                                            ____________________            38   We  note that,  at oral  argument, petitioners  conceded            that no one  had as  yet sought access  to NU's  transmission            facilities.                                         -39-            explicitly  warned NU  that  "[i]n reviewing  NU's filing  to            ensure compliance with  this Opinion,  we will hold  NU to  a            very high standard."  56 F.E.R.C. at 62,025.                      The Commission balanced the merging companies' need            for a "prompt  and fair resolution" of  the merger proceeding            against the intervenors' need "to have [transmission] service            begin  as soon as practical,  together with a fair resolution            of any disputes raised  regarding NU's compliance filing." 56            F.E.R.C.  at 62,025.    An  agency's  discretion  is  at  its            "zenith" when  it fashions remedies to  effectuate the charge            entrusted to it by Congress.   Niagra Power Corp. v. FPC, 379                                           __________________    ___            F.2d 153,  159 (D.C. Cir.  1967).  See also,  Consolo v. FMC,                                               ___ ____   _______    ___            383 U.S.  607, 620-21  (1966); Environmental Action,  Inc. v.                                           ___________________________            FERC, 939 F.2d 1057, 1064 (D.C. Cir. 1991); Boston Edison Co.            ____                                        _________________            v. FERC,  856 F.2d 361,  371 (1st Cir.  1988).  We  hold that               ____            FERC's exercise  of its  discretion was not  inappropriate in            these  circumstances.   FERC  did not  defer, as  petitioners            suggest,  consideration of the anticompetitive effects of the            merger  which  FERC  itself   identified.    The   Commission            recognized the effects, and dealt with them in a reasoned way            which  balanced  the  competing  interests  of  all  parties.            FERC's remedy  is not  unreasonable, and we  therefore affirm            its order.                 D.   Protection of Native Load Customers.                 D.   Protection of Native Load Customers.                      1.   Priority of Services.                           ____________________                                         -40-                           a.   Background.                                __________                      In its  merger  application, NU  made  a  voluntary            commitment   to   provide  wholesale   transmission  service,            including third  party wheeling  service,39  for any  utility            over  its existing transmission system.  At the same time, NU            sought  to limit  this  obligation by  reserving an  absolute            priority  for  power  purchases  on  behalf  of  native  load            customers (whose  power  needs NU  is bound  by franchise  or            contract  to  meet).   The  ALJ  held  that  although NU  may            reasonably give  native load service  priority over  wheeling            service if NU's transmission system had insufficient capacity            to serve both, 53  F.E.R.C. at 65,221-222, NU could  not deny            firm  wheeling   requests  based  upon  the   reservation  of            transmission  capacity for  its  own non-firm  sales, id.  at                                                                  ___            65,225.                        In Opinion  No.  364, the  Commission balanced  the            interests of  native load customers and  third party wheeling            customers  and  affirmed  the  ALJ's denial  of  an  absolute            priority:                      we  .  . .  deny  NU's  proposal to  give                      higher priority to  its own non-firm  use                      than  to third  party  requests for  firm                      wheeling    in     allocating    existing                      transmission  capacity.    In  no  event,                      however, will  NU be required  to provide                      firm third party wheeling service  out of                      existing   transmission   facilities   if                                            ____________________            39   For a definition of "wheeling" see n.9, supra.                                                ___      _____                                         -41-                      reliability  of  service  to native  load                      customers would be adversely affected.            56  F.E.R.C. at  62,021 (footnote  omitted).   The Commission            found it "reasonable to allow NU to reserve firm transmission            capacity  to  provide reliable  service  to  its native  load                                  ________            customers."  Id. (Emphasis in original.)                         ___                      On rehearing,  NU asked the  Commission to  clarify            the  scope of  the "reliability"  criterion.   The Commission            "reiterate[d] that under no circumstances will NU be required            to provide firm wheeling service out of existing transmission            capacity where  doing so would impair  or degrade reliability            of  service to native load customers."  58 F.E.R.C. at 61,199            (emphasis  removed).   The  Commission  held  the concept  of            reliability generally  encompasses the:   (1) reservation  of            transmission capacity to back  up large generating units; (2)            provision of generation reserves; and (3) coverage of certain            future  needs.     As  to  the  coverage   of  future  demand            requirements, the Commission  specifically ordered that  "any            capacity needed for reliability purposes  within a reasonable            planning horizon  must be offered  for wheeling use  until NU            expects  to need the capacity  for reliability reasons."  Id.                                                                      ___            at 61,199-200.                      Petitioners assert  that the  decision to accord  a            priority to native load  over transmission load is arbitrary,            discriminatory, and  anticompetitive.   They argue  that FERC            neither  defined  nor  justified  the   priority  granted  by                                         -42-            allowing reservation of transmission capacity for native load            service  and  that  any  such  priority  creates  competitive            advantages for  NU.  We  hold that the  Commission adequately            defined and reasonably justified its decision to allow such a            reservation  and  properly   addressed  the   anticompetitive            concerns raised by the intervenors.                             b.   Discussion.                                __________                      Although the Commission reaffirmed the general rule            that  firm transmission service  should be  accorded priority            over  non-firm  service, even  if  the  latter would  benefit            native load,    it nonetheless  allowed  NU to  reserve  firm            transmission capacity  needed to ensure reliability of native            load  service and allowed the  use of this  capacity for non-            firm transactions.  58 F.E.R.C. at 61,196.  Thus, native load            service will receive  a "priority" over third-party  wheeling            service  in  allocating existing  transmission  capacity when            reliability  of service  to  native load  would be  adversely            affected.     The  Commission  specifically   qualified  this            priority by requiring NU  to offer the capacity  for wheeling            use until NU needed  it to assure reliability to  native load            customers.                      There  is nothing arbitrary or discriminatory about            FERC's decision.  It struck  a reasonable balance between the            competing interests of native load customers and  third-party            wheeling customers.  NU-PSNH is obligated to serve its native                                         -43-            load  customers.  In return for this obligation to serve, the            native load customers regularly bear the cost of transmission            facilities;  native load  customers pay  for them,  use them,            plan  on them, and rely on them.   As the ALJ noted, "[e]very            New England utility favors  its own native load.   Nothing in            the NEPOOL agreement requires  its members to surrender their            native load preference, and none do."  53 F.E.R.C. at 65,222.            Thus,  "NU should be allowed  to give priority  over safe and            reliable service to its  native load customers using existing            transmission capacity  built to  serve those customers."   58            F.E.R.C. at  61,199.   FERC explicitly defined  and justified            the challenged native load "priority."                      2.   Transmission Upgrades Pricing.                           ______________________________                           a.   Background.                                __________                      NU's commitment to provide third-party transmission            service   includes   the  obligation   to   build  additional            transmission facilities as necessary to  relieve transmission            constraints on  its system.   58  F.E.R.C.  at 61,204-10;  56            F.E.R.C. at 62,021-24.   The issue  then becomes, how  should            the  cost  of  constructing  such  transmission  upgrades  be            allocated.  The ALJ stated  that questions of cost allocation            are  best  addressed  in  future  proceedings  regarding  the            particular   responsibilities   for  particular   facilities.            Nevertheless,  the ALJ  adopted  the "but  for" analysis  for            determining responsibility proposed by NU witness Schultheis:                                         -44-                      [W]heeling customers must make a pro rata                      contribution   whenever  the   facilities                      would  not have been  needed but  for the                      wheeling  transfers across  a constrained                      interface.   This means that  NU's native                      load customers pay for the new facilities                      they  create  the need  for  and wheeling                      customers  pay  for  the facilities  they                      create the need for.            53 F.E.R.C. at 65,223.  The ALJ also noted that the financial            exposure of  transmission customers  was limited by  the cost            caps  to  which NU  was committed.40    Id. at  65,224.   The                                                    ___            Commission agreed that cost  questions should be litigated in            the context of a specific proposal,  and accepted the concept            of  the "but for" test  as a framework  for ascertaining cost            responsibility and the  use of  the proposed cost  caps as  a            reasonable  means of  limiting  the  transmission  customers'            responsibility for  future upgrades.  56  F.E.R.C. at 62,028-            030.   The Commission reaffirmed that  decision on rehearing.            58 F.E.R.C. 61,204-207.                      Petitioners  contend that the  Commission failed to            adequately  explain  the pricing  policy  it  will employ  in            pricing  transmission upgrades.  Basically, petitioners claim            the ruling is too ambiguous to determine whether, or how, the                                            ____________________            40  NU committed  to cap  cost responsibility  to "(1)  those            specific facilities  identified  by NU  at  the time  of  the            wheeling request as needing to be built or upgraded either at            the time of the request or in the future; and (2) the maximum            dollar  amount  contained  in  NU's  initial  estimate  of  a            wheeling customer's pro  rata share  of the  costs of  future            upgrades  needed  to  accommodate   a  request  for  wheeling            service."              56 F.E.R.C. at 62,031-32.                                         -45-            Commission changed its  policy from the traditional  "rolled-            in" approach used  in pricing transmission service.   We hold            that   the  Commission   provided   a  clear   and   reasoned            justification for  the principles that will  guide its future            determinations of  transmission upgrade  pricing.  We  affirm            the Commission's decision not  to modify the basic principles            adopted in its order.                           b.   Discussion.                                __________                      In accepting as reasonable  the "but for" test, the            Commission  has  done no  more than  approve a  framework for            determining  cost responsibility  which furthers  the general            principle  that transmission  costs should  be born  by those            entities  responsible  for the  cost.    58 F.E.R.C.  61,205.            Under  this test,  incremental  cost pricing  could be  found            appropriate when firm wheeling across  a particular interface            would  degrade reliability absent  upgrades.   The Commission            specifically declined, however, to answer the requests of the            intervenors  to  decide  the "rolled-in  versus  incremental"            rate41 issue in  the abstract and  chose instead to  evaluate            it only within the  context of a particular rate  proposal or            upgrade.  Id.   The Commission articulated  how it envisioned                      ___                                            ____________________            41  Under "rolled  in" pricing principles, the upgrade  costs            would  be rolled in with  other company costs  and charged to            all ratepayers as part of NU's  general rate structure; while            administratively   simple,   it   ignores  any   concept   of            responsibility.  Thus, incremental pricing principles look to            hold parties responsible for their share of upgrade costs.                                         -46-            pricing  transmission  upgrades   and  adopted  a   condition            limiting  the  amount  NU  may  propose  to  collect  from  a            transmission customer to the greater of                       (1) the incremental  cost of new  network                      facilities  required  at  the   time  the                      customer's new transmission load is added                      or (2) the rolled-in cost of  all network                      facilities required to serve the combined                      transmission loads of [NU], including any                      required transmission additions.            Id. at 61,206.   Thus, a wheeling customer may be charged the            ___            greater of rolled-in cost rates or incremental cost rates.                         The Commission acknowledged  that the  introduction            of incremental  cost pricing  principles is a  departure from            its  traditional pricing  policies42 and  justified  this new            policy  on NU's  unprecedented  obligation  to provide  third            party transmission service.   Id.  The  Commission noted that                                          ___            incremental  cost  pricing  may  be  appropriate  in  certain            circumstances,  but  decided to  leave  the  details of  cost            responsibility  questions to  a  future specific  section 205            rate case.  When such a  case arises, NU will bear the burden            of   justifying  "any   direct  assignments   of   costs  and            support[ing] any arguments that  reliability is degraded by a            particular  firm transmission  service.    No presumption  is                                            ____________________            42     The  Commission generally  has  adhered to  rolled  in            pricing,   but  has   never  precluded   particularized  cost            allocations to  specific  customers where  appropriate.   See                                                                      ___            Utah Power & Light Co., 45 F.E.R.C.   61,095, at 61,291 n.163            ______________________            (1988);  Public Service Co. of Indiana, 51 F.E.R.C.   61,367,                     _____________________________            at 62,203 (1990).                                         -47-            created  by  NU's  `but  for' criterion  that  firm  wheeling            customers always cause the need for upgrades."  Id. at 61,207                                                            ___            (quoting 56 F.E.R.C. at 62031).   The Commission also allowed            that  any  reliance by  NU  upon the  "but  for" test  may be            challenged in  future actions.   The Commission  sufficiently            explained and  justified the  principles that will  guide its            transmission upgrade pricing.                 E.   Opportunity Cost Pricing.                 E.   Opportunity Cost Pricing.                      As has already been discussed, the Commission found            it necessary to impose a number of conditions on the proposed            NU-PSNH merger to mitigate  the merged company's market power            in the  markets for  transmission and short-term  bulk power.            58 F.E.R.C.  at 61,195.    Specifically, the  Commission held            that  NU  must  provide  firm  transmission  service  out  of            existing  capacity  for  any   utility,  subject  only  to  a            reservation  of  sufficient  capacity  to  maintain  reliable            service to its  native load customers  and to honor  existing            contractual obligations.   NU was  prohibited, however,  from            denying a request for  firm transmission service by reserving            capacity for  non-firm transactions  that would enable  it to            provide more economical service to its native load customers.            56 F.E.R.C.  at 62,014-21;  58 F.E.R.C. at 61,196-200.   FERC            also  held   that  NU  must  build   additional  transmission            facilities   as   needed   to   provide   transmission  where            insufficient capacity  exists.  56 F.E.R.C.  at 62,021-24; 58                                         -48-            F.E.R.C. at 61,204-10.   The Commission found that  these and            other conditions  would  "adequately mitigate"  the  merger's            anticompetitive effects.  58 F.E.R.C. at 61,213.                      On rehearing, NU and  the States of Connecticut and            New Hampshire  argued that the Commission  should address the            issue of  firm transmission  pricing because, in  Opinion No.            364, FERC  had established  principles governing  the related            issue of  firm transmission priority which  made NU's ability            to purchase  inexpensive power (which would lower its cost of            serving  its  native  load  customers)  subordinate  to   its            obligation  to provide  firm transmission for  third parties.            58  F.E.R.C.  at  61,201-02.    The  Commission  agreed,  but            declined  to approve  "opportunity  cost  pricing"43  outside            the  context of  a specific  tariff proposal.   Instead,  the            Commission announced three "basic  goals" to guide its future            decisions on the  pricing of firm transmission service on the            merged company's existing capacity, and left the door open to            NU  to propose  a tariff  based on  opportunity costs  or any                                            ____________________            43   As the Commission explained, opportunity costs                      are the  revenues lost or  costs incurred                      by  a  utility  in providing  third-party                      transmission  service  when  transmission                      capacity is insufficient to  satisfy both                      a  third-party  wheeling request  and the                      utility's   own   use.     For   example,                      opportunity   costs  might   include  the                      revenues lost or costs incurred because a                      utility  must  reduce its  own off-system                      purchases or sales in order to overcome a                      constraint on the [transmission] grid.            58 F.E.R.C. at 61,200-201.                                         -49-            other  methodology  that would  meet  the three  goals.   The            Commission explained its decision as follows:                        We are now confronted with the need  to                      provide   NU   with  enough   specificity                      regarding  what it  will  be  allowed  to                      propose for the  pricing of future third-                      party  wheeling  service,  so   that  the                      company  can  decide  whether to  proceed                      with the  merger.  We also  cannot ignore                      the  need  to  act  as  expeditiously  as                      possible  given the  commercial realities                      and time pressures presented in corporate                      matters subject to our  jurisdiction, and                      in  particular  the  need  to  resolve  a                      bankruptcy situation.   At the  same time                      we are confronted with the need to ensure                      an  adequate record on pricing issues and                      to   afford   all  parties   an  adequate                      opportunity to voice their objections.                        Balancing  these  respective needs,  we                      conclude  that  the  best  course  is  to                      provide guidance on  pricing issues,  but                      to defer specific  pricing issues to  the                      compliance phase of  this proceeding,  or                      to subsequent cases where  the Commission                      may consider specific  proposals from  NU                      in a concrete, factual setting and with a                      more developed record.                      . . . .                      First, the  native load customers  of the                      _________________________________________                      utility  providing  transmission  service                      _________________________________________                      should   be   held  harmless.     Second,                      _________________________________________                      transmission customers  should be charged                      _________________________________________                      the lowest reasonable cost-based rate for                      _________________________________________                      third-party transmission service.  Third,                      _________________________________________                      the pricing should prevent the collection                      _________________________________________                      of  monopoly  rents  by the  transmission                      _________________________________________                      owner and  promote efficient transmission                      _________________________________________                      decisions.      In  ruling   on  specific                      _________                      proposed  rates,  we  will balance  these                      three  goals  in light  of the  facts and                      circumstances presented at that time.               58 F.E.R.C. at 61,203 (emphasis added) (footnotes omitted).                      FERC  was careful  to  point out  that it  endorsed            opportunity cost pricing  only insofar as NU  could show that                                         -50-            it could "propose rates which  include legitimate, verifiable            opportunity costs."  Id.   The Commission warned NU  that any                                 ___            such  proposal would  be carefully  scrutinized and  would be            subject to challenge.  Id. at 61,203-04.  Specifically,  FERC                                   ___            stated that  NU would  have to  address the  following issues            should it seek recovery of opportunity costs:                      (1) whether opportunity  costs should  be                      capped by incremental expansion  costs or                      any  other  cap;   (2)  whether   current                      wheeling   and   wholesale   requirements                      customers  should be  treated differently                      from   future   wheeling  and   wholesale                      requirements    customers,    e.g.,    by                                                    ____                      receiving    "grandfather"   rights    to                      embedded cost  rates  for the  amount  of                      transmission  capacity they  already use;                      (3) how NU  will identify those customers                      responsible for growth on its  system and                      what   particular   new  facilities   are                      necessary to accommodate that growth; (4)                      whether  and how third  parties should be                      protected   from   uncertainty  regarding                      fluctuations  in  opportunity costs;  (5)                      how  the proposed rates  will prevent the                      collection of monopoly rents; and (6) how                      the  proposed  opportunity costs  will be                      verified.                         Id.    The Commission  expressly  postponed consideration  of            ___            whether opportunity cost pricing  would be inconsistent  with            nondiscriminatory  pricing  and  nondiscriminatory terms  and            conditions of  service until  those issues  were raised  in a            concrete factual context.  Id. at 61,204, n.118.                                       ___                      Petitioners claim that FERC's decision  amounted to            an arbitrary endorsement of opportunity cost pricing that was            not  supported  by evidence  in  the  record, was  inherently                                         -51-            discriminatory, and contrary to FERC's  regulation of natural            gas pipelines.   Petitioners' underlying concern  seems to be            that  when  the  issue arises  next  in  the  context of  the            Commission's  review  of NU's  compliance  tariff, FERC  will            simply approve the tariff and dismiss petitioners' objections            on the  ground that  opportunity cost pricing  principles had            already  been  endorsed  by  the  Commission.    Although  we            understand petitioners' concerns,  we believe  that they  are            misplaced and that FERC did not go as far as petitioners fear            in endorsing opportunity cost pricing.                      Petitioners will have an opportunity to contest any            compliance tariff proposed by NU.  The Commission itself laid            out a number of issues which NU would have to address were it            to  propose a tariff based on opportunity costs.  58 F.E.R.C.            at 61,203.   Only  after carefully considering  the competing            interests of providing  guidance to  NU as to  what kinds  of            tariffs it would consider, and  the need to endorse  specific            methodologies only on the  basis of a fully-developed record,            did  the Commission  decide  to outline  broad pricing  goals            which would allow  for a number of pricing  schemes including            opportunity  cost pricing.  Id.   It was  squarely within the                                        ___            Commission's  power  to defer  consideration  of petitioners'            assertions until  after NU filed  its compliance tariff.   As            the  Supreme  Court  has  held,  "[a]n  agency  enjoys  broad            discretion in determining how  to handle related yet discrete                                         -52-            issues  in  terms  of  procedures, and  priorities."    Mobil                                                                    _____            Exploration   &   Producing   Southeast,   Inc.   v.   United            _______________________________________________        ______            Distribution  Cos., 111  S.  Ct. 615,  627 (1991)  (citations            __________________            omitted).   Petitioners argue that deferral was inappropriate            in this case because  their objections went "to the  heart of            the  public interest  determination  to be  made."   Maryland                                                                 ________            People's Counsel v. FERC, 761 F.2d 768, 778 (D.C. Cir. 1985).            ________________    ____            We disagree.                      The   Commission   announced   pricing  goals   and            conditions  that   it  determined  would   keep  the   merger            consistent  with the  public  interest, and  would result  in            "just and  reasonable rates."   Until NU proposed  a specific            tariff regime, the Commission did not have a developed record            to evaluate on the  merits.  The Commission remains  free to,            and  we expect it will, invite  objections to NU's compliance            tariff from  affected parties,  and will reject  any proposed            tariff that  conflicts with its  statutory responsibility  to            approve rates  that are "just and reasonable," and to approve            mergers that are, as conditioned, "consistent with the public            interest."                 F.   Environmental Impact Statement.                 F.   Environmental Impact Statement.                      The  City of  Holyoke  Gas  &  Electric  Department            ("HG&E") alleges that FERC's refusal to examine the potential            environmental  impacts  of its  approval  of  the merger  was            arbitrary and capricious.  We disagree.                                         -53-                      The National Environmental  Policy Act of 1969,  42            U.S.C.    4321 et seq., ("NEPA") requires federal agencies to                           __ ____            consider the  potential environmental effects  of a  proposed            major  federal  action  that  may  significantly  affect  the            quality of the human environment.   Section 102(2)(C) of NEPA            states:                      The Congress authorizes and directs that,                      to the  fullest extent  possible:  . .  .                      (2) all    agencies   of    the   Federal                      Government shall                        . . . .                      (C)  include  in every  recommendation or                      report on proposals  for legislation  and                      other major Federal actions significantly                      affecting  the  quality   of  the   human                      environment, a detailed statement  by the                      responsible official on                          (i)  the  environmental  impact of  the                      proposed action,                        (ii) any  adverse environmental effects                      which  cannot  be   avoided  should   the                      proposal be implemented,                        (iii)  alternatives   to  the  proposed                      action,                        (iv)  the  relationship  between  local                      short-term uses of man's  environment and                      the maintenance and enhancement  of long-                      term productivity, and                         (v) any  irreversible and irretrievable                      commitments of resources  which would  be                      involved in the proposed action should it                      be implemented.            42  U.S.C.    4332(2)(C).   Agencies  were authorized,  under            guidelines  promulgated  by  the  Council   on  Environmental            Quality ("CEQ"), to create categorical exclusions for actions            which do not individually  or cumulatively have a significant            effect  on  the human  environment.    40  C.F.R.     1507.3,            1508.4.    FERC  adopted   such  a  category  of  exclusions,                                         -54-            including one for merger  approvals such as the one  at issue            in this case.  That regulation states in pertinent part:                      (a) General  rule.  Except  as stated  in                      paragraph (b) of this section, neither an                      environmental    assessment    nor     an                      environmental  impact  statement will  be                      prepared  for  the following  projects or                      actions:                      . . . .                        (16) Approval of actions under sections                      4(b), 203, 204, 301,  304, and 305 of the                      Federal  Power  Act relating  to issuance                      and  purchase of  securities, acquisition                      or   disposition  of   property,  merger,                      interlocking directorates, jurisdictional                      determinations and accounting orders.            18  C.F.R.    380.4(a)(16).    An  agency  need  not issue  a            "finding  of  no  significant  impact"  in  cases  concerning            matters that fall into a categorical exclusion.  40 C.F.R.               1501.3, 1501.4, 1508.13.                      CEQ  guidelines  also  required  agencies  adopting            categorical   exclusions   to   "provide  for   extraordinary            circumstances in which a normally  excluded action may have a            significant environmental effect."  40 C.F.R.   1508.4.  FERC            made such provision in its regulations:                        (b)    Exceptions     to    categorical                      exclusions. (1) In accordance with 40 CFR                      1508.4, the Commission and its staff will                      independently    evaluate   environmental                      information  supplied  in an  application                      and  in  comments by  the public.   Where                      circumstances indicate that an action may                      be a major  Federal action  significantly                      affecting  the  quality   of  the   human                      environment, the Commission:                        (i) May require an environmental report                      or    other    additional   environmental                      information, and                                          -55-                        (ii)  Will   prepare  an  environmental                      assessment  or  an  environmental  impact                      statement.                        (2) Such circumstances  may exist  when                      the action  may have an effect  on one of                      the following:                        (i) Indian lands;                        (ii) Wilderness areas;                        (iii) Wild and scenic rivers;                        (iv) Wetlands;                        (v) Units of  the National Park System,                      National   Refuges,   or  National   Fish                      Hatcheries;                        (vi)  Anadromous   fish  or  endangered                      species; or                        (vii)  Where the  environmental effects                      are uncertain.                      However, the existence of  one or more of                      the above will not  automatically require                      the submission of an environmental report                      or  the  preparation of  an environmental                      assessment  or  an  environmental  impact                      statement.            18  C.F.R.     380.4(b).44    HG&E  argues  that  the NU-PSNH            merger might  "alter mixes  of generation  in New  England by            constraining  the locations for new plants."   HG&E points to            the language of 18 C.F.R.   380.4(b)(1)(ii) in support of its            position  that FERC was  compelled, at the  least, to explain            why  it   was  not  obliged   to  perform  the   analysis  of            environmental  effects required  by  NEPA.   HG&E also  cites            FERC's  decision  in  Southern   California  Edison  Co.,  49                                  __________________________________            F.E.R.C.     61,091  (1989)   (holding  that    380.4(b)  was            triggered when approved merger would result in the dumping of                                            ____________________            44  HG&E  does  not challenge  the  validity  of  any of  the            applicable regulations cited above.                                         -56-            hundreds of tons of additional air contaminants into the most            polluted air in the United States).                      There was no evidence in the record of identifiable            environmental harms that would likely result from the NU-PSNH            merger.  The  fact that new generating  facilities might wind            up  in different locations than  would have been  the case in            the absence of  the merger does not approach in significance,            because  its  significance  is  not quantifiable,  the  known            effects of  the  merger between  Southern  California  Edison            Company  and San  Diego Gas  & Electric  Company.   Thus, the            factual  situation presented in Southern California Edison is                                            __________________________            completely distinguishable from that of this case.                      The   character  and   location   of   the   future            environmental effects of the  NU-PSNH merger are so uncertain            that  no  meaningful  environmental  review would  have  been            possible, even had  FERC made the effort.  Here, FERC was not            approving  a  regional  development  plan.    It  was  merely            approving a merger between utility companies, albeit a merger            involving  two  of  the  largest utilities  in  New  England.            Energy  demand may increase in New England over the following            decades, and the fact  of the merger may influence  how those            needs  are met.  Nevertheless, any attempt by FERC to prepare            an  EIS would  have involved  little more  than spinning  out            multiple  hypothetical  development forecasts,  with multiple            options  for   the  type,  amount  and   location  of  future                                         -57-            generating facilities.  See  Kleppe v. Sierra Club,  427 U.S.                                    ___  ______    ___________            390, 401-2 (1976).  Once concrete plans have been established            for   the   construction   of  transmission   or   generating            facilities, those  proposals will  be reviewed under  NEPA or            the applicable state environmental review procedures.                      FERC  was justified  in  deciding  that neither  an            environmental   assessment   nor   an  environmental   impact            statement was required prior to approving the NU-PSNH merger.                 G.   HG&E's "Unique" Harm.                 G.   HG&E's "Unique" Harm.                      HG&E also  contends that because it  relied on PSNH            New Hampshire  Corridor facilities for over  one-third of its            electricity supply,  it would be "uniquely  threatened" by NU            in head-to-head competition for  large, industrial loads.  To            protect    itself,   HG&E   requested   that   FERC   either:            (1) disapprove  the merger;  (2) require  the  divestiture or            restructuring of  NU's retail  business in Holyoke  (HWP); or            (3) grant  HG&E  grandfather  rights to  PSNH  New  Hampshire            Corridor transmission.  The ALJ rejected the "drastic remedy"            of divestiture of HWP, stating that it was  "wholly uncalled-            for  by anything in this record," and holding that HG&E would            be  adequately  protected by  the  conditions  to the  merger            designed   to   address   the  anticompetitive   effects   on            transmission dependent  utilities ("TDUs").   53  F.E.R.C. at            65,232.                      As the ALJ described,                                         -58-                      [t]he  Transmission  Dependent  Utilities                      (TDUs) are  "entirely dependent on  NU or                      PSNH  for  their bulk  power transmission                      needs."  These  companies (most of  which                      involve municipal ownership) are  not big                      enough  to  own  or construct  sufficient                      generation to meet their loads.  As their                      brief states, they "are physically unable                      to  engage in any  bulk power transaction                                    ___                      without using the NU or PSNH transmission                      systems.  Absent  economic access to NU's                      or  PSNH's  transmission facilities,  the                      TDU  cannot  survive  as  an  independent                      entity."   The  TDUs compete with  NU and                      PSNH in the wholesale bulk  power market;                      each   TDU,   like  NU/PSNH,   seeks  out                      attractive sources of  supply.  TDUs thus                      "are in  the  uneasy position  of  having                      their    only    source   of    essential                      transmission  service  in  the  hands  of                      their principal competitor."  These small                      companies,    uniquely    vulnerable   to                      possible  anticompetitive   conduct,  are                      entitled  to  some measure  of protective                      assurance regarding NU/PSNH's post merger                      conduct.            53  F.E.R.C. at 65,232-33.   The ALJ held  that "[a]ll rates,            terms and  conditions of NU/PSNH transmission  service to the            TDUs in effect  on this date shall . .  . be maintained after            the merger,  unless and until changes are  either agreed upon            by  the merged  company and  the TDUs,  or authorized  by the            Commission."  53 F.E.R.C. at 65,233.  In short, while finding            that  TDUs  were  "uniquely  vulnerable"  to  anticompetitive            conduct by NU-PSNH,  the ALJ  found that HG&E  had not  shown            that  it was  entitled to  protections beyond those  given to            TDUs  generally.    The  Commission agreed,  56  F.E.R.C.  at            62,049,  but bolstered the protection for TDUs ordered by the                                         -59-            ALJ by imposing the additional condition  that NU establish a            special tariff for TDUs.  Id. at 62,050.                                      ___                      HG&E  points  to  no  evidence  in  the  record  to            indicate  that it  faced anticompetitive consequences  of the            merger sufficiently  different in  character or magnitude  to            warrant greater  protections than those given  to other TDUs.            We therefore affirm the Commission's actions to protect TDUs,            which were adequately explained and supported in the record.                 H.   Modifications to the Filed Rate Schedules.                 H.   Modifications to the Filed Rate Schedules.                      The Commission analyzed the Seabrook Power Contract            and Capacity Interchange Agreements  filed by NUSCO under the            "just and reasonable"  standard of    206 of  the FPA,45  and            ordered the  following modifications to  the rate  schedules:            (1) deletion of the automatically adjusting rate of return on            equity  provision  in  the   Seabrook  Power  Contract;   (2)            reduction of the  rate of  return on equity  in the  Seabrook            Power  Contract from  13.75 percent  to 12.53  percent;46 (3)                                            ____________________            45   Section  206(a)  of  the  FPA,  16  U.S.C.     824(e)(a)            provides:                        Whenever the  Commission, after hearing                      had  upon   its   own  motion   or   upon                      complaint, shall find that any rate . . .                      collected by any public  utility . . . is                      unjust,        unreasonable,       unduly                      discriminatory   or   preferential,   the                      Commission shall determine  the just  and                      reasonable  rate . . .  to be  thereafter                      observed and in force, and shall  fix the                      same by order.            46   NUSCO did not appeal this modification.                                         -60-            North  Atlantic's decommissioning expenses under the Seabrook            Power Contract  and any subsequent changes  thereto were made            subject to  review by  the Commission;  (4) reduction  in the            rate  of return  on  equity  specified  in the  two  Capacity            Interchange Agreements  from 14.50  percent to 13.17  percent            for the period from July 27, 1990 through August 8, 1991, and            thereafter  to  12.93 percent;  and  (5)  the Seabrook  Power            Contract  could be modified  by the Commission  in the future            under the "just and reasonable" standard of   206 of the FPA,            rather than the "public  interest" standard agreed to  by the            parties.  56 F.E.R.C. at 61,993; 58 F.E.R.C. at 61,185.                      Each  of the  three parties  to the  Seabrook Power            Contract ("SPC"), NU,  PSNH and the  State of New  Hampshire,            waived  its right to file  a complaint under    206 regarding            the rates contained in the agreement.  Section 12 of  the SPC            also provided that:                      [E]ach [party] further agrees that in any                      proceeding  by the FERC under Section 206                      the  FERC  shall   not  change  the  rate                      charged under this Agreement  unless such                      rate  is found  to  be  contrary  to  the                      public interest.            NU argues  that the Commission  violated the  "Mobile-Sierra"                                                           _____________            doctrine47 when  it  modified the  SPC  in disregard  of  the            intent of the parties.                                            ____________________            47   This doctrine is based on the  companion cases of United                                                                   ______            Gas Pipe Line  Co. v. Mobile  Gas Service Co.,  350 U.S.  332            __________________    _______________________            (1956)  and FPC  v. Sierra  Pacific Power  Co., 350  U.S. 348                        ___     __________________________            (1956).                                         -61-                      Under  the  Mobile-Sierra doctrine,  the Commission                                  _____________            must respect certain private  contract rights in the exercise            of its  regulatory powers.  Parties  to a contract may:   (1)            waive  their  rights to  file  a  complaint challenging  that            contract,  and (2) restrict  the power  of the  Commission to            impose rate changes  under   206 to  cases in which it  finds            the  rates contrary to the public interest   a more difficult            standard  for  the  Commission  to meet  than  the  statutory            "unjust and  unreasonable" standard  of    206.   See  Papago                                                              ___  ______            Tribal Utility Authority  v. FERC,  723 F.2d  950, 953  (D.C.            ________________________     ____            Cir. 1983), cert. denied,  467 U.S. 1241 (1984).   In Papago,                        ____________                              ______            the court held  that, regardless of the  parties' intent, the            Commission retained, in any event,                      the indefeasible right . . . under    206                      to replace rates that are contrary to the                      public interest, "as where  [the existing                      rate   structure]    might   impair   the                      financial ability of  the public  utility                      to continue its  service, cast upon other                      consumers  an  excessive  burden,  or  be                      unduly discriminatory."            Papago, 723 F.2d at  953, (quoting Sierra, 350 U.S.  at 355).            ______                             ______            The court  went on to  note that  "unduly discriminatory"  in            this  context  "apparently  means  unduly  discriminatory  or            preferential  to  the detriment  of  purchasers  who are  not            parties to the contract."  Papago, 723 F.2d at 953 n.4.                                       ______                      In  this case,  seemingly for  the first  time, the            Commission held that it also had the                                         -62-                      authority   under  the   public  interest                      standard to  modify a contract where:  it                                                             __                      may   be  unjust,   unreasonable,  unduly                      ________________________________                      discriminatory  or  preferential  to  the                      detriment  of  purchasers  that  are  not                      parties to  the contract;  it is  not the                                                 ______________                      result  of arm's length bargaining; or it                      _________________________________________                      reflects  circumstances where  the seller                      _________________________________________                      has  exercised  market  power   over  the                      _________________________________________                      purchaser.                      _________            50  F.E.R.C. at 61,839 (emphasis added).  The ALJ interpreted            that holding as follows:                      The  Commission  made clear  that  in the                      particular circumstances  surrounding the                      Seabrook  contract,  it  retains power                         through the "public interest"  language                        to    make   modifications    under   the                      traditional   just  and   reasonable  and                      nondiscrimination standards.            53 F.E.R.C.  at  65,235.   The  standard established  by  the            Commission, and  subsequently applied by  the ALJ,  conflates            the  "just and  reasonable" and "public  interest" standards,            thereby  circumventing  the  Mobile-Sierra  doctrine.     The                                         _____________            distinction  between the  "just and  reasonable" and  "public            interest"  standards  loses  its   meaning  entirely  if  the            Commission may  modify a  contract under the  public interest            standard  where it  finds  the contract  "may be  unjust [or]            unreasonable."   The  parties'  express intent  was to  avoid            review  of  rate  schedules  under the  just  and  reasonable            standard.    Mobile-Sierra protects  their  right  to do  so,                         _____________            leaving the Commission  with the power  to modify rates  only            when required by the public interest.                                         -63-                      The  Commission  found that  the  SPC  might unduly            discriminate  against entities not  parties to  the contract,            and that there was no genuine arm's-length bargaining because            NU and PSNH negotiated the agreement at a time when they knew            they were about to  merge and have identical interests.   The            Commission held  that, in  this context, it  could "carefully            scrutinize the  rates, terms and conditions  of the contract"            to determine if they were just.  Id.                                             ___                      The Commission's  explanation for employing  a just            and  reasonable  standard seems  to  us inadequate.    To the            extent  the  Commission   is  relying  on   NU's  prospective            ownership of PSNH, it is unclear why the Commission should be            concerned    about   protecting   PSNH   from   a   perceived            disadvantageous arrangement imposed by its  prospective owner            since any disadvantage visited on  the prospective subsidiary            will be borne by its owner.  If NU chooses  to allocate risks            among its operating subsidiaries  and one of its subsidiaries            is  disfavored in  this calculation,  there would seem  to be            little justification for the Commission stepping in on behalf            of the disfavored subsidiary absent some threat to the public            interest.                      As for the seller's  market power, reliance on this            factor  threatens  to  erode  the  Mobile-Sierra doctrine  so                                               _____________            substantially that  a fuller explanation  from the Commission            is required before  proceeding down this  route.  After  all,                                         -64-            some  measure of  market power  could be  present in  a large            number  of  contracts.    A  case-by-case  inquiry  into  the            presence  and extent of market  power would inject  a new and            potentially  time-consuming  element  into the  Mobile-Sierra                                                            _____________            analysis, and it is not entirely  clear in any event why  the            Commission should protect a buyer who voluntarily enters into            an agreement with a dominant seller.                      The  most attractive case  for affording additional            protection, despite  the presence of a contract, is where the            protection is  intended to  safeguard the interests  of third            parties,  notably the  buyer's customers.   The Mobile-Sierra                                                            _____________            doctrine itself allows  for intervention by FERC  where it is            shown  that the  interests of  third parties  are threatened.            Mobile,  350  U.S.  at  344-45;  Sierra,  350  U.S.  at  355.            ______                           ______            However, the  standard to be  applied, as  formulated by  the            Supreme  Court, is  the  protection of  outside parties  from            "undu[e] discriminat[ion]"  or  imposition of  an  "excessive            burden."  Sierra,  350 U.S. at 355.  If  there is some reason                      ______            for departing from this public interest standard as framed by            the Supreme Court, the Commission has not supplied it.                      We  assume, without  deciding, that:   (1)  FERC is            correct  in its assertion that the State of New Hampshire did            not adequately represent the  interests of non-parties to the            contract,  and  that,  therefore,  the SPC  may  have  unduly            discriminated  against those non-parties; and (2) the alleged                                         -65-            lack of arms'-length bargaining among NU,  PSNH and the State            of  New Hampshire gave  the Commission the  right to evaluate            the SPC.  We hold, however,  that the Commission was bound to            follow  the Mobile-Sierra  doctrine as explicated  by Papago,                        _____________                             ______            and therefore should have evaluated  the SPC under the public            interest standard, not the just and reasonable standard.                      We  therefore remand this issue for reconsideration                                    ______            by FERC under the public interest standard.48            IV.  SUMMARY.            IV.  SUMMARY.                      We affirm  the Commission's orders in  all respects                      We affirm  the Commission's orders in  all respects                      ___________________________________________________            with the exception of its modifications of the Seabrook Power            with the exception of its modifications of the Seabrook Power            _____________________________________________________________            Contract filed with the merger  proposal which we remand  for            Contract filed with the merger  proposal which we remand  for            _____________________________________________________________            consideration under the public interest standard.            consideration under the public interest standard.            _________________________________________________                                            ____________________            48   We have considered, but find unpersuasive, NU's argument            that FERC  committed error  when it disrupted  the bankruptcy            settlement by modifying the Capacity Interchange Agreements.                                         -66-
