News Analysis

Fortnightly Magazine - January 15 1998
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THE RECENT INCREASE IN MERGER ACTIVITY IN THE energy and telecommunications industries has concerned state regulators for some time. Such concern reveals how the practical or "local" aspects of business deals often clash with broader national issues reviewed by federal authorities in merger cases.

In electric utility mergers, for instance, the Federal Energy Regulatory Commission will address effects on competition, rates and regulation. It will pay close attention to "macro" factors, such as whether industry consolidation or concentration of market power comports with federal goals for electric deregulation and restructuring. %n1%n

By contrast, state regulators examining merger proposals will focus primarily on matters of local concern. %n2%n Regulators try to identify who the merger will benefit or harm, including its effect on the local job market and economic development efforts. They will attempt to identify and allocate merger-related "savings" and maintain quality of service, rather than pay too much concern to the overall goals of electric restructuring. %n3%n However, as does the FERC, state regulators will seek to confirm their ability to maintain ongoing regulatory oversight after the merger.

Mergers and Local Benefits: Mutually Exclusive?

A decision issued last year by the District of Columbia Public Service Commission demonstrates the tension between local concerns and broader industry issues facing state regulators as they review merger proposals. In this case, the commission approved, subject to numerous conditions, the proposed merger of Potomac Electric Power Co., and Baltimore Gas and Electric Co. %n4%n

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