The New Art of Plant Acquisition

Deck: 

Forget the mega merger as a means to acquire new power plants. FERC’s new rules may offer a better path.

Fortnightly Magazine - June 2006
This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.

Predictions of a U.S. electric merger wave heated up last summer, when the Energy Policy Act of 2005 (EPACT) repealed the 1935 Public Utility Holding Company Act (PUHCA), thereby allowing acquisition of electric utility companies by foreign firms, domestic non-utilities, or other non-contiguous utilities.1 Factors including demand growth for electricity, re-regulation, potential profitability of baseload power plants caused by high natural-gas prices, and competitive pressures have made the electric utility industry, particularly power generation, more attractive for investment and take-over activities.

Starting Feb. 8, 2006, any electric utility asset transfer with a value exceeding $10 million is subject to Federal Energy Regulatory Commission (FERC) approval.2 Until recently, a utility asset transfer with a value of $50,000 has been subject to FERC approval. Section 203 of Federal Power Act (FPA) raises the threshold value of the transaction from $50,000 to $10 million. Will this increase in the minimum-threshold value be perceived as a lowering of regulatory hurdles, thereby spurring more electric utility plant acquisitions?

This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.