Will the deal with FPL serve the best interests of ratepayers?
Richard Stavros is Fortnightly's Executive Editor.
It’s no big secret: The utility industry has assembled a checkered past, earned through a series of bad decisions, often in pursuit of dubious ambition. Sometimes the investors have had to cover the losses. Other times, ratepayers have bailed out billion-dollar blunders.
And the memories are fresh. Only recently have merchant-energy trading houses such as Mirant and NRG come out of bankruptcy, while other merchants now are seeking protection through Chapter 11 (Calpine).
That’s the reason for concern. For, even as many hope that repeal of the Public Utility Holding Company Act (PUHCA) will lead to more efficient and rational corporate structures, they also fear that repeal could foster irrational exuberance, with mergers that fail spectacularly.
Maybe that explains why every new utility merger announcement is being met with a much higher level of scrutiny than in past decades. For example, the merger proposal involving FPL and Constellation has failed to dissuade the typical chorus of opposition and indignation, coming, as it has for years in these cases, from all sorts of investors, industry experts, and consumer advocates. They say the deal should be stopped in its tracks. Why?