Management: Merge,. Divest, or Both?
s Merger Magic
"Occasionally, yes. There are obviously some fairly easily measurable synergies in some mergers. . . . The real issue, however,
is not whether there are savings. The real issue is could those savings have been obtained without concentrating the economic power that goes with a merger?
"Generally, we've dealt with it with judgment. That is, somebody in authority, usually the antitrust authorities or a judge, makes a decision with the two principals that guide the decision. . . . There is a general bias against concentrated economic power in this society, and therefore, if there are two firms merging with any indication of monopoly power at all, that deserves a very careful scrutiny. And the second bias overlaps the first one. And that bias is: You don't approve the merger if the gains can be accomplished in any other way without the merger."
s Debt Service
"Two things are going to raise the cost of generation a little. For the first time, the history of the industry and the real risk of making these long-term capital investments are going to fall on the investor. . . . One of the great defects of the regulatory system was it drafted a group of amateurs called ratepayers and made them the principal risk-bearers for these very durable capital-intensive pieces of equipment. And they have had to pay a very big price for being drafted in that role.
Yes, there will be an increase in the cost of money for generators."
s Hard Numbers
"I don't know. I hear these statements that we're going to end up with a small oligopoly (em a couple hundred, with probably 15 or 20 of them being large and the rest of them tailing off with smaller sizes to meet special needs.
"Setting the number of transmission companies is a tougher issue. If I had my preferences, we'd probably end up with 10 or 12. But I've never quite been able to defend that. I see no reason why we should not be able to plan and operate a transmission system much better if it spanned a very large, single trading area that spanned several states."
"Existing antitrust laws are designed to [prevent market power]. We all have our own views as to how well they do that, but they probably protect us from the more serious and prolonged abuses. And I see no reason why we need anything special on the electric side, although I would like to see better performance out of the antitrust people in a lot of dimensions. . . . I do think, however, that during the transition period it is the task of the FERC to make sure we get a competitive market in generation." t
Charles G. Stalon, an independent consultant in Cape Girardeau, MO, has been a commissioner for both the Illinois Commerce Commission and the FERC. Prior to his consultancy, he was director of the Institute of Public Utilities and a professor of economics at Michigan State University. He recently chaired the Competitive Power Market