Profit Pressures Push Power Companies To Merge, But Regulators Pose Wildcard #EXC, #POM, #SO, #GAS RSS Feed

Profit Pressures Push Power Companies To Merge, But Regulators Pose Wildcard

Mergers are uncertain marriages. Witness Tuesday’s rejection of the Exelon EXC Corp. and Pepco Holdings POM Deal. That dumping by state regulators, though, may not apply to the Southern Co and AGL Resources GAS proposal announced Monday.

It’s all about future growth, although the deals were proposed for different reasons: Southern wants to increase its participation in the natural gas business, which its Atlanta neighbor AGL provides. Meanwhile, Exelon wanted Pepco to gain entrance to certain northeastern markets and to get steady cash flows.

Both mergers have or will endure the scrutiny of federal monitors and state utility commissions. And that has been problematic: Before the economic recession in 2008, state utility commissions had rejected a spate of proposed mergers, noting that they didn’t benefit local customers. However, after the recession, mergers involving big utility companies started to heat up. Regulators in regions that had been financially hurt looked favorably on those deals that provided access to capital from those entities with deep pockets.

Now, though, the District of Columbia Public Service Commission has turned down Exelon’s proposed buyout of Pepco, saying that it cannot manage such a complex transaction and that it is not consistent with its desire to build out the area’s renewable energy portfolio. Pepco operates not just in the nation’s capital but also Maryland, Delaware and New Jersey.

By contrast, the Georgia Public Service Commission already regulates both Southern and AGL. And, Commission Chair Chuck Eaton told Public Utilities Fortnightly in an in depth interview last fall that he fully understands the transition from coal to natural gas — and that regulators are trying to ensure such changes do not become disruptive to utility markets or customers there.

Read full story at Forbes