[BETA] Fortnightly

Deregulate in haste; repent at leisure. That's what they say about love, marriage, and ratemaking. Yet, in the utility business the regrets are pouring in (em sometimes from the same people who sent out the invitations.

For example, at the end of November, a week before I put fingers to keyboard, the FERC was shocked to discover that the proposed Altus merger between The Washington Water Power Co. and Sierra Pacific Power Co. would achieve no fuel savings related to integrated operations and central dispatch and, because of their geographic separation, the two companies "will be operated as two separate electric control areas and will not be jointly dispatched as a single integrated system." The FERC saw no other choice but to grant motions to intervene, put off immediate approval of the merger, and consolidate the proceedings for hearing and decision. (See, FERC Dkt. Nos. EC94-23-000, ER95-808-000, Nov. 29, 1995 (draft order).) The decision to wait assigned even greater importance to the campaign now underway by Commissioner Massey to push the idea of stricter merger approval guidelines at the FERC, in anticipation of open-access transmission as well as a predicted horizontal concentration in the electric industry (utilities, in Massey's words, would "combine to get ready for disaggregation"). Readers may want to return to our January 1 issue and reread the article, "Hurdling Ever Higher: A New Obstacle Course for Mergers at the FERC?," by attorneys John P. Mandt and Karl R. Moor, which takes issue with several of Massey's ideas.

Efficiency is the last bastion of the regulator.

A Long Courtship

The urge to merge goes way back. The Public Utility Act of 1935, which ushered in the Federal Power Act and the Public Utility Holding Company Act (PUHCA), reveals the antimerger bias prevalent at that time, which once formed the groundwork an unsuccessful presidential campaign, and may in fact do so again. (See, "The Revenge of Wendell Wilkie," this issue, by James Moeller). Today, with yet another PUHCA reform bill in the hopper (S. 1317, introduced October 12 by Sen. Alphonse D'Amato), it may be time to reread the Act and figure out what all the fuss was about.

In putting this issue together, author Jon Erik Kingstad ("Merger Menace: Holding Companies and Overcapitalization," p. 42) kindly sent me a copy of the Senate report prepared during the PUHCA legislative debate by the National Power Policy Committee on Public Utility Holding Companies. Among other things, the report examines "the intensification of economic power beyond the point of proved economies," and describes such activity as "a form of private socialism inimical to the functioning of democratic institutions and the welfare of a free people." That was the Depression, when inequality of incomes threatened to erode American democratic institutions.

Is today any different? In October I attended an American Bar Association meeting and heard economist Alfred E. Kahn deliver a two-hour unrehearsed talk on utility competition. Kahn, who is known to support recovery of stranded investment, sees some of the more promising models for utility deregulation as including "competitively neutral charges" (e.g., exit