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Mergers & Acquisitions

CP&L + Florida Progress. Carolina Power & Light announced Aug. 23 that it would purchase Florida Progress Corp. for $5.3 billion in a combination that would create the nation's ninth-largest utility in terms of generating capacity, with $6.7 billion in annual revenues and 2.5 million customers in three states. CP&L would pay a premium (between 16.5 percent and 21 percent) over the pre-announcement share price of FP stock.

As utility takeovers break new ground, the FERC ponders proposed rules, perhaps already out of date.

A year ago, when U.S. Antitrust Czar Joel Klein talked of a "window of opportunity" for electric utility mergers, he didn't predict when it would close.

And it hasn't yet.

In the 12 months leading up to January 1998, when Klein had addressed the Federal Energy Regulatory Commission through its "Distinguished Speakers" series, only the ill-timed Primergy deal had been turned down. The next year, 1998, would prove no different.

These executives are energizing the power business with their persistence, ideas and pure gut instincts.

What is an innovator? Must he, or she, be an inventor? Or merely an idea-prone CEO with a knack for building a string of successful companies? Or could an innovator be both a scientist and CEO?

In this first-ever feature, Fortnightly has chosen innovators from all segments of the energy business.

ARE UTILITIES STOCKS STILL MAKING WIDOWS AND orphans happy?

According to PaineWebber's report, Power Book, utility stocks "are likely to continue to lag the market." Of the 66 electric utilities surveyed, only 9 earned a "buy," or "1," recommendation, and six scored "unattractive," or a "4" rating (see table). The rest fell somewhere between, their stocks labeled either "attractive," or "neutral."

While a merger can bolster a company's potential, it isn't a sure bet. Cinergy Corp.

IN A RECENT SPEECH TO A SOPHISTICATED WASHINGTON AUDIence of electric industry players, FERC Commissioner William Massey raised a difficult question: "Can ISOs become self-policing institutions, thereby allowing FERC to embrace light-handed regulation of transmission?"

In answering his own question, Massey confirmed a quasi-judicial role for independent system operators (em but only if they are "equipped with proper operational rules, including market monitoring plans that report market power abuses and contemplate enforcement mechanisms to assure compliance." %n1%n

Despite such op

Federal Agencies

ELECTRIC RETAIL PRICES. The Energy Information Administration has released a new report finding that the average retail price of electricity has declined for the third year in a row and remained stable for the first nine months of 1997. According to Electric Sales and Revenue 1996, average residential electric prices declined slightly in 1996, the first drop for that consumer class since the EIA began collecting data in 1984.

FOR ALL THE ATTENTION FOCUSED ON NEW LAWS AND regulations designed to create competition in electric power markets, too few people seem to grasp how a market can work. That will change, however, now that Pennsylvania is the first large state to embrace market pricing.

Pennsylvania's lawmakers and three of its five utility commissioners have developed a market to deliver the benefits of competition to consumers.

Federal Agencies

Nuclear Plant Fines. The Nuclear Regulatory Commis-

sion has proposed fines totaling $2.1 million against Northeast Nuclear Energy Co. for many violations at the company's Millstone nuclear plant in Waterford, Conn. The fine marks the largest civil penalty ever proposed by the NRC. Northeast Utilities said it will pay the fine, which it called "a necessary and important step toward bringing to closure a very disappointing and difficult chapter in the company's history." The utility said it will not pass the cost onto ratepayers.

Electric Futures.

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.

IN THE EARLY 1970s, WHEN THE "ENERGY CRISIS" DAWNED, New York told electric utilities to stop advertising to promote electric use. State judges deemed such promotion as lacking in "any beneficial content," or even "detrimental to society." It took an appeal to the U.S. Supreme Court for utilities to win the right to tout their product.

Today's questions target the bottom line: Can advertising boost sales for energy suppliers? If so, what does it take?