MORRIS: Utility Merger Frenzy Isn't Healthy
Once upon a time in America, both political parties damned giant monopolies. At the turn of the century, Republican President Teddy Roosevelt fought concentrated power with anti-trust laws. His favorite target was the energy industry, which in those days meant the oil companies.In the 1930s Democratic President Franklin Roosevelt fought monopolies in another energy sector: electric utilities. The 1935 Public Utility Holding Company Act broke up these powerful conglomerates whose financial manipulations had wreaked havoc on the national economy.Today our political parties are no longer willing to challenge concentrated power. The clearest example of their cowardice is their remarkable silence in the face of one of the most remarkable phenomena in recent history: the frenzied couplings of the nation's energy utilities.Ten years ago utility mergers were rare. In the last 18 months, on the other hand, on average, one large merger has been announced every month. Texas based gas giant Enron Corporation is acquiring Portland General Corporation of Oregon. Dallas based Texas Utilities, the nation's fourth largest electric company, is buying Enserch Corporation, the largest gas distribution company in Texas. Houston Industries, the nation's ninth largest electric utility is gobbling up NorAm Energy Corporation, the nation's third largest natural gas utility.On the east coast, Atlantic Energy is buying Delmarva. In the nation's capital, Baltimore Gas and Electric and Potomac Power Company are becoming one. Last year $18 billion of mergers took place . So far this year another $20 billion has been announced.In state after state concentrated power is growing at an astonishing speed. For example, in 1990 Iowa boasted six investor owned utilities. After the latest merger two will remain. By the year 2000 only one might be left.Utilities argue that mergers save money. They may, but even by the utilities' own self-serving calculations, such savings are trivial and short term and could largely be achieved without formal mergers.Consider, for example, the proposal by the Wisconsin Energy Corporation (WEC) and Minnesota's Northern States Power (NSP) to create a new $6 billion company called Primergy. NSP says customers will save less than $1 a month.The cruel irony is that these mergers are occurring at precisely the moment that we are radically revising the rules that govern the electricity sector in order to promote more competition. You may have read about the nationwide interest in letting customers choose their own electricity provider. On the one hand the nation is developing policies that will expand the number of electricity suppliers that customers can choose from. On the other hand we are acquiescing to mergers that will shrink the number of suppliers and hamper competition. That these two courses clearly contradict one another apparently has yet to occur to our politicians. For them the attitude seems to be, "Full speed ahead and damn the consequences".To date no state legislature or state or federal regulatory commission has rejected a merger application. This year the Minnesota legislature refused even to hold hearings on the potential impact of the proposed NSP/WEC merger.Newspapers put merger stories in their financial pages. Reporters call up financial brokers for predictions about how the mergers will affect bond ratings and stock prices. No newspaper has offered its readers a critical scrutiny about the impact of mergers on Main Street rather than Wall Street.Electric utilities have $300 billion in annual revenues. That is more than the telephone and airline industries combined. Electricity is not a convenience. It is a necessity. Industrial economies cannot survive without electricity. That is why 60 years ago we decided not to allow decisions about this vital sector to be the province of giant conglomerates and Wall Street financial firms.Yet it is possible that in a few years we will have the worst of two worlds: a deregulated electric industry dominated by a handful of energy conglomerates. 1990s, meet the 1920s.In this dreary situation a few voices are speaking up. Irwin Popowsky, Vice President of the National Association of State Utility Consumer Advocates has made the eminently reasonable request that federal regulators deny a merger unless the companies show an "actual benefit" to consumers. Other experts have urged the federal government to adopt the Teddy Roosevelt approach and use an anti-trust framework when evaluating utility mergers.In Wisconsin, the state's smallest investor owned utility, the Madison Gas and Electric Company is leading the way. MG&E has spent $1 million to fight the NSP/WEC merger.In most states utilities already wield considerable influence. They have enticed legislatures and regulatory commissions to support their petitions by promising to freeze or slightly reduce energy rates for a few years. The old Republican and Democratic Parties of Teddy and Franklin Roosevelt would not have been bought off so easily.At recent political conventions the names of these two great Presidents still are bandied about. But the passion for democracy and the courage to speak truth to power that drove them has long since been extinguished in their political descendants.