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Reconsidering Synergies

Cap-ex plans raise the stakes for utility mergers.

Fortnightly Magazine - July 2011

also benefit when capital costs are kept in check and large capital investments are spread over larger customer bases. In any case, this win-win alignment on synergies appears to signal an opportunity for the industry to capture more opportunities through consolidation in the face of significant capital requirements.



1. Liam Denning, “ Duke and Progress Paint a Colorless Picture ,” MarketWatch, Jan. 11, 2011.

2. “Buying Time,” Michael T. Burr, Fortnightly, October 2004.

3. Peter Rigby, “Why U.S. Electric Utility Mergers Jeopardize the Balance Sheet,” Standard & Poor’s, June 14, 2005.

4. Becher, Mulherin and Walkling, “ Sources of Gains in Corporate Mergers: Refined Tests from a Neglected Industry ,” Oct. 27, 2010.

5. In the Matter of the Application of the Merger of FirstEnergy Corp. and Allegheny Energy, Inc. , Case No. 9233, Public Service Commission of Maryland, at p. 42 (Jan. 18, 2011). It’s also worth noting that the Maryland PSC rejected the applicants’ proposed reliability goals as a condition of approval since reliable electric service is a core function that customers already pay for, but did hope that reliability wouldn’t deteriorate given the opportunities to share resources and best practices between the two utilities. Id. at pgs. 52-53.

6. Financial Times, Interview with Jim Rogers (March 6, 2011).

7. Questions and Answers posted on the Duke website (Feb. 24, 2011), as filed with the SEC.