Central and South West Corp. (CSW) has notified El Paso Electric Co. (EPE) that it has breached the companies' merger agreement by participating in discussions about and spending large sums on a possible stand-alone reorganization plan. CSW said it was not terminating the merger, but merely protecting its rights. On May 22, CSW received a request from EPE to extend the merger agreement for six months, until December 8, 1995. "EPE's failure to remedy its breaches will be among the factors CSW considers in deciding what action to take on or after the termination date" of the merger agreement (June 8, 1995), CSW said in its letter. The proposed merger is contingent upon regulatory approvals or authorizations from state and federal agencies. It also may be terminated by either company upon certain conditions.
Meanwhile, New Mexico Public Utilities Commission hearing examiner Michael Barlow has recommended that the merger be approved. In a 93-page opinion, Barlow found the merger consistent with the public interest because it would benefit EPE's customers by providing rate certainty and stability. He recommended a three-year rate freeze, and no rate hikes greater than 6 percent for a four-year period thereafter. Barlow agreed with EPE/CSW that ratepayers would benefit from an expected $385 million in operational savings. He also noted that benefits would flow from the agreement not to charge ratepayers for EPE's bankruptcy costs or the $352 million in damages the utility paid out to settle Palo Verde litigation claims. t
Lori A. Burkhart is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.