The movement to introduce competition in the electricity industry comes at a time when many utilities are already ailing or underperforming. In fact, since 1990, half of U.S. investor-owned utilities (IOUs) have failed to consistently grow their dividends, or have cut or eliminated them altogether. According to a new study by Resource Data International, U.S. Electric Utility Industry Merger and Acquisitions, 1996, the current trend toward mergers and acquisitions is fueled by a desire to improve shareholder returns.
Out of roughly 100 electric IOUs examined for the period 1991 through 1995, approximately 50 percent increased their dividend every year (see table). Approximately 16 of the companies grew their dividends, but reported no increase in 1994 or 1995. A slightly higher number showed flat dividends, or only one or two annual dividend increases. Thirteen companies took the drastic step of cutting their dividend, including several of the industry's major players: SCEcorp (now Edison International), FPL Group, PacifiCorp, and Unicom (Commonwealth Edison). Four of the IOUs currently pay no dividends.
Electric Utility Dividends, 1991-95
Category Number of Companies
Consistently Growing Dividends 50
Omitted '94 or '95 Increase 16
Flat or 1-2 Annual Increases 18
Cut Dividends 13
No Dividend 4