Merger Strategy: Make Regulators Marginal

Here are some readers' responses to the May 2013 essay, "Merger Strategy:  Make Regulators Marginal."

From Bill Wells:

When I saw the title I was wondering if marginal was used in its common or economic sense.   After reading it, it occurred to me that while you meant it in its common usage, the other one still made sense too. The other issue, and probably unavoidable is when the merger crosses state lines the various commission are all only dealing with their part of the elephant.

From Nancy Brockway:

I have thought for some years that regulators are loathe to define the public interest, which makes it hard to protect it. As for regulated firms putting the public ahead of management and shareholders ... Vail and Insull could pursue universal service because it nicely aligned with their long-term view of their industries' own interest. But since economies of scale were exhausted, the battle has been more pitched and required more cojones on the part of regulators...but without an image of the ideal, we will never get there.

From a Western official:

Here in the West (where inter-utility cooperation for the benefit of consumers is not what it should be) my worry is that M&A activity that maybe should be happening for reasons of economic efficiency is not happening because of parochialism: the desire on the part of smaller IOUs to be their own fiefdoms, a belief that being a utility limited in size to one or two states makes their clique all the more powerful and controlling over a particular state government (as opposed to the “alien” merchant generators or multi-state regulated IOU), and a real fear of the unknown on the part of the long-timers (those who have worked at the utility for decades).

Perhaps a future essay in this merger series should be how regulators can prod utilities toward beneficial corporate reorganization when the utility in question is reluctant to do so (and how regulators can in the first place be in a position to know when stagnation has swamped potential efficiencies).