Booz Allen consultants offer five critical factors in realizing merger-related savings.
Do Utility Mergers Deliver?
Not in all cases, or for all stakeholders. Here’s why.
and policy objectives.
The management of merging utilities will be well served to maintain clear and open dialogue with employees so they understand both the opportunities and risks associated with any merger transaction. Achieved with even modest success, these activities will serve to support the current trend to merge. Over time, and especially if multistate or regional regulatory compacts evolve, larger utilities should be better positioned to site regional transmission lines, support large-scale generating projects, implement smart-grid technology, or make meaningful contributions to regional economic development.
1. It is common practice for merging utilities to project synergy savings. We have included only those associated with specific rate-reduction commitments.
2. Sierra Pacific Resources’ merger with Nevada Power did not contain a specific merger savings in the regulatory approval. The Nevada commission’s approval was conditioned on divesture of generating assets (subsequently reversed) to promote wholesale competition, and was subject to goodwill recovery over time with offsetting merger savings.
3. “ Winners and Losers: Utility Strategy and Shareholder Return ,” James Coyne and Prescott Hartshorne, Public Utilities Fortnightly , October 2004.