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Electricity Utility Mergers: The Answer or the Question?

Fortnightly Magazine - January 1 1996

Lighting Co. may soon be socialized. Size was of little help to AT&T after competition became strong enough. Competition is emerging everywhere in the industry, in the face of determined opposition from established utilities. Today's mergers will not stop market forces, and they will not turn utilities into market forces of their own. Mergers do not necessarily produce political momentum. Nor is political inertia guaranteed by creating companies that are "too big to fail." If two merging utilities intend to build an ark for themselves, they should understand that the next flood will last longer than 40 days. t

Robert J. Michaels is a professor of economics at California State University, Fullerton, and a consultant at JurEcon, Inc. His research and commentaries on utility competition have often appeared in the FORTNIGHTLY and elsewhere. He is author of the entries on electricity and gas regulation in the Fortune Encyclopedia of Economics (Warner Books, 1993). The views expressed in this article are not necessarily those of his affiliations or clients.


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