El Paso Electric

The bankrupt El Paso Electric Co. (EPE) has asked the New Mexico Public Utilities Commission for permission to issue securities as part of its proposed acquisition by Central and South West Corp. (CSW) (em a necessary step in consummating the merger. Under EPE's third amended plan of reorganization, the utility would recapitalize by issuing new debt securities and preferred stock. CSW also would infuse additional common equity into EPE. The new securities, along with cash payments and shares of CSW common stock, would be used to settle the outstanding claims of EPE's creditors.

For better or worse, deregulation is now a factor in the electric utility industry. As a general proposition, deregulation makes for increased competition, which in turn will trim costs for consumers. Deregulation of the electric industry means that utilities face the prospect of freezing or reducing rates to retain market share. Stranded investments and the burdens of above-market supply contracts and construction and development contracts (especially nuclear-related contracts) will place additional pressure on these utilities and further reduce their revenue.

The pending merger of El Paso Electric Co. (EPE) and Central and South West Services, Inc. (CSW) keeps going and going and going. But the issue of "comparability" has yet to be left in the dust. And so another landmark case looms large, giving the Federal Energy Regulatory Commission (FERC) another opportunity to shape future wheeling and merger transactions.