THE RECENT INCREASE IN MERGER ACTIVITY IN THE energy and telecommunications industries has concerned state regulators for some time. Such concern reveals how the practical or "local" aspects of business deals often clash with broader national issues reviewed by federal authorities in merger cases.
In electric utility mergers, for instance, the Federal Energy Regulatory Commission will address effects on competition, rates and regulation.
USE OF U.S. ECONOMY UPHELD FOR EQUITY CALCULATIONS
The Federal Energy Regulatory Commission, in seven rate cases involving interstate natural gas pipelines, has upheld a new policy on the appropriate long-term growth rate to be used in computing their return on equity. Five of the pipelines contested FERC's new policy, as announced in Opinion 396-b.
The Commission defended the rate-setting method, but decided to allow the pipelines a chance to prove why the rules should not apply to them. The contesting pipelines are: Trailblazer Pipeline Co. (Docket No.
The Missouri Public Service Commission has approved the merger of Union Electric Co. and CIPSCO Inc., if Union Electric meets certain requirements, such as helping to form an independent system operator for the region's transmission system.
The formation of the ISO must be consistent with guidelines established by the Federal Energy Regulatory Commission. The proposed merger will include the formation of a new entity, Ameren Corp., as a federally regulated public utility holding company.
Acquisition Premium.
Some shareholders do find bottom-line value
in a "marriage of convenience."
With six merger and acquisition (M&A) deals announced between May 1995 and January 1996, and three more so far this year, the long-predicted consolidation of the electric utility industry is taking hold. At least 23 utilities, with business-combination transactions pending, are part of the frenetic domestic M&A activity that has swept the industry.
As utilities refocus resources on their core business, they are developing strategic partners to manage day-to-day support services more efficiently. Operational functions that received scant notice in the past are now identified as areas for big savings.
Transportation services mark one such area. Activities like vehicle acquisition, resale, maintenance, fueling, and routine administration are now widely viewed as outsourcing opportunities (em to reduce costs and enhance productivity.