General Electric

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.

The Palm Springs City Council has approved a contract with Portland General Corp., the parent company of Portland General Electric, which specifies the roles and responsibilities of both parties as the city establishes a new utility, "City of Palm Springs Energy Services."

Last December, Palm Springs had selected Portland General to become the city's new energy services partner to help it develop a municipal utility to compete in a deregulated marketplace.

The 9th U.S. Circuit Court of Appeals has ruled that Portland General Electric Co., could not invoke "state action immunity" as protection against antitrust charges in a case involving the division of the Portland, Ore., market into exclusive service territories.

Columbia Steel Casting Co., a large industrial consumer of electric power in the city, had sued Portland General and another local utility, Pacific Power & Light Co., charging both companies with dividing the city's electric users among them in violation of federal antitrust laws.

The Oregon Public Utilities Commission staff has recommended the proposed merger of Portland General Electric Co. and Enron Corp. be approved with conditions, and has asked for a customer-rate reduction of $47.4 million for four years.

Subsequently, an $11.2-million rate-reduction component would remain part of electric rates until PGE's next rate proceeding. The staff would include a feature to true up rate-reduction amounts if certain future revenues exceed expectations.

The Oregon Public Utility Commission has approved a settlement agreement allowing Portland General Electric Co.

Dakota Gas Plant. FERC reverses law judge, ok's settlement on rates for synthetic natural gas produced at the Dakota Gasification plant. Commissioner James Hoecker terms result "unhappy," citing jurisdictional constraints: "I feel we are supporting a resolution in this case that otherwise would not be in the public interest." Dkt. Nos. RP93-100-000 et al., Dec. 18, 1996.

Reactor Designs. NRC certifies two new designs for nuclear reactors: ASEA Brown Boveri-Combustion Engineering System 80+, and General Electric Nuclear Energy Advanced Boiling Water Reactor.

Southern Communications Services, Inc., which recently entered the wireless communications market, has begun to market products and services under the name of its parent, Southern Company. Southern also is parent to Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric.

Gulf Power, meanwhile, signed a contract with Scientific-Atlanta, Inc. for two-way energy management applications. Some 40,000 homes will be fitted with the interactive systems over eight years.

Ever since word hit the street last July that Portland General Electric Co. (PGE) would merge with gas industry giant Enron, the news has been rather one-sided. It's been "Enron this" and "Enron that." From reading the papers one might think Enron, with its strong reputation as a commodities trader, was buying an entire electric utility simply to take a bigger position on the NYMEX futures market.

The Oregon Public Utility Commission has authorized Portland General Electric Co. to expand market-based (discounted) pricing options for commercial and industrial (C&I) customers, by lowering the minimum load threshold from 10 to 5 megawatts.

Pricing under the new tariff is based on either 1) an annual fixed-price quote set at the beginning of the contract year and reflecting the market price of power delivery to the utility's service territory; or 2) the daily nonfirm price at the California-Oregon Border, plus 1 mill per kilowatt-hour.

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.