Enova merger approved after company agrees to sell two plants

The US Justice Department has approved a $6 billion merger between Enova Corp. and Pacific Enterprises after Enova agreed to sell off its two largest power plants.

The Justice Department had challenged the original merger deal on the grounds that it would ultimately force electricity prices in California to rise.

Enova is the parent company of San Diego Gas and Electric, the third largest electricity supplier in the state of California. Pacific Enterprises transmits and stores natural gas throughout California.

Natural gas fired power plants in California depend on Pacific to transport or store the gas they require. The government challenge to the merger was based on the argument that a combined Pacific/Enova company would have an incentive to use its natural gas monopoly to withhold gas or gas transmission from competing gas fired power plants.

Gas fired plants tend to set the price for electricity when demand peaks. Through its gas monopoly, the government argued, the merged company could have driven up the price of electricity throughout the California Power Exchange.

To settle the dispute, Enova agreed to sell its two largest, low-cost electricity plants. However, the Justice Department challenge to the merger, which was the first of its kind, could be repeated in other states in the USA where deregulation is taking place.