The article "Electric Utility Mergers: The Answer or the Question?" (by Robert J. Michaels) in the January 1, 1996, issue, along with current events involving my employer, a midwestern utility currently involved in a merger, initiated some questions and comments regarding top executives chairmen.
We expect continued mergers and acquisitions (M&A) in the continental United States until 50 or fewer utilities serve the nation.
Citing competition in residential energy markets, the Connecticut Department of Public Utility Control (DPUC) has approved a new heat-pump rate discount and installation rebate program proposed by United Illuminating Co. (em but with an eye trained on market share.
The DPUC acknowledged a prior reluctance to approve tariffs that promote specific end uses, but found that competition justified new approaches. It also cited other positive factors, including: 1) the utility's long-term surplus capacity outlook, 2) its low marginal cost, and 3) heat pump efficiencies.
The Arkansas Public Service Commission (PSC) has authorized Arkla, a division of Noram Energy Corp. and a natural gas local distribution company (LDC), to apply a weather normalization adjustment to billings from November through April. Finding that the new clause did not constitute a "general rate increase," the PSC rejected procedural objections that it failed to meet certain notice requirements.
SCEcorp has a new corporate structure and name: Edison International. It also has a new subsidiary, Edison Source, which specializes in solutions for energy efficiency, the environment, and energy marketing. Edison International now has five subsidiaries; its flagship, Southern California Edison, is the nation's second-largest IOU.
In a generic case, the Vermont Public Service Board (PSB) has announced guidelines for the development of restructuring plans for the electric utility industry. It asked the parties to the case to focus on the issues of customer choice, stranded costs, and stranded benefits. Plans for broad, industrywide restructuring must also address: 1) economic net benefits, 2) jurisdiction, 3) interstate coordination, 4) policy balance and fairness, and 5) pragmatic concerns such as competitive or market distortions.
As this snapshot look at the seven utility mergers announced since January 1995 demonstrates, traditional patterns are no longer being followed. A number of the announced transactions did not fit squarely into either the merger-of-equals model (little or no premium, fairly even equity and board split, CEO succession plan) or the acquisition model (high premium, disparate equity and board split, no CEO succession plan).
Standard & Poor's (S&P) plans to maintain negative outlooks on the three largest California electric utilities (em Southern California Edison (SCE), San Diego Gas & Electric (SDG&E), and Pacific Gas & Electric (PG&E). Although it considers the California Public Utilities Commission's (CPUC's) December 20 electric restructuring order "reasonably favorable," S&P will not reexamine the ratings until it is sure the plan will be finalized as proposed. S&P's concern is that some members of the California State Senate believe small customer interests would not be adequately protected.
While it has lifted a stay that had delayed approval of the merger between Washington Water Power Co. and Sierra Pacific Power Co., the Washington Utilities and Transportation Commission (UTC) has rejected the use of "single-system pricing" to average costs between divisions in the new company, Resources West Energy Corp.
Michigan Attorney General Frank J. Kelley has filed a request to intervene in an action pending before the Nuclear Regulatory Commission (NRC). The action concerns the NRC's failure to address a request by Consumers Power Co. to unload spent, high-level nuclear fuel from a defective cask at the Palisades nuclear plant.
Kelley is filing in support of a petition by two consumer groups that want the NRC to prevent Consumers from using dry-cask storage because the utility has violated its license to operate that system.
The California Public Utilities Commission (CPUC) has concluded that Pacific Gas and Electric Co. (PG&E) acted imprudently in deciding to enter a 15-year contract for interstate capacity on Transwestern Pipeline Co. expansion projects that came on line in 1992. It disallowed recovery of the costs associated with the Transwestern commitments in 1992 and in each subsequent year of the 15-year contract. The disallowed amount for 1992 is $13.6 million for the utility's gas department and $4.5 million for its electric department.
