The Federal Energy Regulatory Commission's approval this week of the $2 billion merger of Utah Power & Light and PacifiCorp was very welcome, but the conditions attached to the decision raise a number of new obstacles. As a result, the two utilities probably will not be able to move quickly to consumate the merger.
Those conditions require the merged company to open its strategic transmission lines to other utilities, something that could affect the profitability - and thus the consumer rates - of the new entity. The companies had pledged to reduce UP&L rates by as much as 10 percent in the wake of a merger.With this in mind, the Utah Public Service Commission has decided it must review once again how the merger would affect Utah electric power consumers and has withdrawn its earlier approval.
While that means more delay, the PSC is undoubtedly correct in re-examining the entire proposal, something that both UP&L and PacifiCorp also will have to do in coming days.
The FERC verdict was a bit of a surprise because it reversed an earlier recommendation by the FERC's own administrative law judge, who urged that the proposed merger be denied. In his report, Judge George P. Lewnes had cited 91 arguments against the merger and not a single one for it.
Such reversals by the FERC are not unknown, but neither are they exactly common.
The boards of directors for both companies will meet early next week to consider the FERC conditions and see if they want to proceed with the merger. While it's hard to imagine they would not go ahead, the possibility exists. And they still have the Utah PSC to deal with.
Members of the Utah PSC will examine the FERC order to see how it affects UP&L and its Utah customers. The PSC will then decide if its earlier approval for the merger will stand. Regulatory agencies in the six other states affected - California, Idaho, Montana, Oregon, Washington, and Wyoming - also approved the merger earlier. That unanimous backing probably had a significant bearing on the FERC decision.
Under the proposed merger, UP&L would become a division of PacifiCorp, which also owns Pacific Power & Light. The resulting company would be one of the bigger utilities in the nation, serving more than 1 million customers over seven Western states.
The merger would provide more efficient service through power sharing arrangements, lower construction costs, and lower labor costs. The latter would not come from any layoffs but through attrition.
No time should be wasted in seeking to resolve the questions raised by conditions imposed on the merger. Let's hope they prove to be only minor obstacles.