The First REAL Electric/Gas MergerEnron's bid
to acquire Portland General heralds a new phase
in utility competition.
Why the Holding Company Act doesn't matter.
By Charles M. Studness
The merger agreement between Enron and Portland General Corp. has reshuffled the electric restructuring deck. It makes electric utilities takeover targets for outside suitors after 60 years of peaceful immunity. It drives home the fact that electric utilities will be thrust squarely into the zero-sum game of head-to-head competition. It demonstrates that market forces will limit the ability of regulators to control restructuring. It brings the convergence of gas and electric markets to center stage.
Enron's proposed acquisition of Portland General appears surprising only in its timing. Since 1935, the Public Utility Holding Company Act (PUHCA) has effectively given electric utilities immunity to takeovers by outsiders. Its requirements have proven sufficiently onerous that no private corporation outside the utility industry has been willing to acquire a utility and fall subject to jurisdiction under the Act.
Enron apparently expects that PUHCA will have been repealed by the time it completes its acquisition of Portland General, since it is probably no more willing to be saddled with PUHCA than anyone else.
Without the protection afforded by the Holding Company Act, an electric utility should prove as likely a target for a takeover as any other company. In this case, Enron has simply anticipated repeal instead of waiting for it to occur. Now that Enron has made its preemptive strike, others can be expected to follow.
Competition Turned Aggressive