Edited by Peter C. Carstensen and Susan Beth Farmer
Chapter 2: Mergers in the US Electric Power Industry
2. Mergers in the US electric power industry Richard J. Pierce It is extraordinarily diﬃcult to devise and implement a socially-beneﬁcial merger policy in a network industry that is the subject of an ongoing restructuring process intended to increase reliance on market forces to obtain socially-desirable results. In order to decide which proposed mergers to approve or disapprove, antitrust agencies and regulatory agencies must know that which no one can know – how the restructuring process will evolve over the typical multi-decade period. This knowledge is required to complete a restructuring of a network industry. The agency responsible for announcing and applying a merger policy applicable to an industry that is in the process of restructuring must make a series of diﬃcult, recurrent decisions. First, should the policy be designed to ﬁt the present industry structure or should it instead be designed to ﬁt some expected future structure? If the latter, which of the many potential future structures should the agency use as its baseline for evaluating the expected eﬀects of a proposed merger? Finally, should the agency use its merger policy only as a means of reacting to changes in industry structure proposed by private market participants, or should the agency use its merger policy proactively as a means of encouraging the types of restructuring activities that it considers critical to the success of the agency’s restructuring program? The US electric power industry illustrates well the daunting nature of the task. The following brief summary of...
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