The FERC`s policy on electric mergers: A bit of perspective
During the past sixty years when electric power has been a pervasively regulated industry, no comparable epidemic of mergers or related consolidations has broken out. There have been a few sporadic efforts at merger, but nothing like the present phenomenon. While pervasively regulated, electric utilities apparently saw little advantage in merger. They also probably correctly thought that their regulators, especially the state regulators, would not view merger activities with great favor. But above all, the utilities did not perceive the risk-the risk of bankruptcy-that deregulation has brought. Before the energy crisis of the 1970`s, the most significant risk encountered by the investor-owned electric utility industry was of a government take-over in the 1930`s or of the encroachment of public power at various times and places. Otherwise, the industry led a blissful life of guaranteed franchises, ever-expanding revenues, ever-declining costs and cost-plus regulation. In the 1970`s and 1980`s came the agonies of inflation, fuel shortages, cost overruns and plant disallowances. For the most part, however, the regulators saw to it that the industry continued to recover its costs, after a fashion. With competition only a gleam in professorial eyes, only a few mergers were announced and consummated. The floodgates opened with passage of the Energy Policy Act of 1992. Competition, centered on the generation segment of the classic trio of generation, transmission and distribution, loomed larger and larger. And with competition in generation came bedeviling risk. For with deregulation, the government presumably will cease to be concerned that the generating parts of the industry recover their costs. The electricity business thus has lost its oldest friend. Where there was once manageable or at least calculable risk, there is now formidable fear of the unknown and the potentially disastrous. 109 refs.
- OSTI ID:
- 530582
- Journal Information:
- Energy Law Journal, Vol. 18, Issue 1; Other Information: PBD: 1997
- Country of Publication:
- United States
- Language:
- English
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