Hossein Haeri, M. Sami Khawaja, and Matei Perussi
Do mergers and "critical mass" really make a difference? The answer, it seems, is yes.
To become more competitive, U.S. electric utilities have embarked on a quest in recent years to improve operational efficiency and factor productivity. The question is: Are utilities making progress? And, which companies have gained a competitive edge? Which have not?
Industry analysts have long argued that given the structure of the markets they serve and their cost-based, rate-setting procedures, electric utilities tend toward monopolistic behavior.
Can utilities learn to deliver?
Selling electricity is not like selling a pair of sneakers. Electricity is a product consumers can neither see, feel nor smell. Try it on? Go for a test drive? Not hardly. So how does an electric utility make its product appealing to consumers?
Some say it all comes down to price. A penny saved is a penny earned. But what about tenths of a penny? Do consumers know or even care what they pay for a kilowatt-hour? Just keeping the lights on seems enough for most.
Anticipating the opening of the retail electricity market, MidAmerican Energy Co.
Zond Development Corp. will supply MidAmerican Energy Co. with 45 MW of wind-generated power per month for 20 years. Terms of the agreement were not released, but Zond will begin supplying energy within three years of regulatory approval. The contract helps fulfill the utility's alternate energy requirements under Iowa law. Zond will generate the power from about 150 wind turbines planned for Buena Vista County. The windmills will interconnect with the MidAmerican transmission system at a nearby substation.
George R. Hall, and Richard J. Pierce, Jr.
New legislation would tackle the most difficult problem (em low load factors for small-volume customers.
We commend the Natural Gas Competition and Deregulation Act, SB 215, passed by the Georgia General Assembly in March. (Governor Zell Miller was expected to sign the bill in April.) The Georgia legislation envisions a new framework for regulating the retail gas market.
Lori A. Burkhart
Ohio Edison Company and Centerior Energy Corp. announced an agreement September 17 on a tax-free, stock-for-stock merger to form a new holding company, FirstEnergy Corp., worth about $4.8 billion, based on stock prices that closed several days earlier.
The news came a month after two other merger deals were announced in mid-August: 1) Atlantic Energy, Inc. and Delmarva Power & Light Co. ($2.2 billion), and 2) Houston Industries Inc. and NorAm Energy Corp. ($3.8 billion). NorAm is the nation's third-largest U.S. natural gas utility.
Ronald L. Adams, an executive from Transcontinental Gas Pipeline, was named president of CNG Transmission Corp. He replaces L.J. Timms, Jr., who retired.
Lee Elder was hired by GE Nuclear Energy as manager of market development. Elder was g.m. of nuclear marketing and technology for Black & Veatch and started a joint venture between the two companies to service boiling water reactors.
The Oklahoma Corporation Commission has hired Richard L. Heck, a former U.S.
Michael J. Hamilton
Some shareholders do find bottom-line value
in a "marriage of convenience."
With six merger and acquisition (M&A) deals announced between May 1995 and January 1996, and three more so far this year, the long-predicted consolidation of the electric utility industry is taking hold. At least 23 utilities, with business-combination transactions pending, are part of the frenetic domestic M&A activity that has swept the industry.
Kent Knutson, Christopher Neil, and Albert Pearson
Over the past two and a half years, 10 large mergers have been announced, involving 21 investor-owned electric and gas utilities. Only the MidAmerican Energy merger has been completed, but the estimated market value of the pending mergers is an astounding $40.5 billion. Clearly, this recent wave of merger and acquisition (M&A) activity signals that electric utilities are positioning themselves for future competitive energy markets.
Results from Resource Data International's (RDI's) recent study, U.S.
Lori A. Burkhart
The Federal Energy Regulatory Commission (FERC) has conditionally approved market-based rates for power sales by MidAmerican Energy Co., finding a lack of generation market dominance (Docket No. ER96-719-000).
In 1994, the FERC granted MidAmerican's affiliate power marketer, InterCoast Power Marketing Co., authority to sell power at market-based rates, conditioned on the submission by Iowa-Illinois Gas & Electric Co. (MidAmerica's predecessor in interest) of a tariff providing comparable transmission service.
Lori A. Burkhart
Kansas City Power & Light Co. (KCPL) and UtiliCorp United have propose to merge in a stock transaction valued at about $3 billion. Like MidAmerican before them, the utilities are calling the deal a "merger of equals" that will result in a company with about $6.4 billion in assets and about 2.2 million customers.
KCPL shareholders will receive one share of stock for each share of KCPL common stock; holders of UtiliCorp common stock will receive 1.096 shares. There are about 62 million shares of KCPL common stock and 46 million shares of UtiliCorp common stock outstanding.