Electric Utility Mergers

This work presents a fresh view of how to conduct an economic analysis for proposed mergers of electrical utilities, as Frankena and Owen are not associated with investor-owned utilities.

Competition in the generation, transmission, and distribution of electricity is of increasing interest to policy makers as well as to buyers and sellers of power. This work focuses on mergers, but the economic principles explained here will be useful in analyzing many important issues flowing from growth of competition in electric power.

Competition in the generation, transmission, and distribution of electricity is of increasing interest to policy makers as well as to buyers and sellers of power. The use of competition as a social policy tool to benefit consumers carries the necessity of preserving competition when it is threatened by mergers or other structural changes. The work explains central principles of antitrust economics and applies them to mergers in the electric power industry. This work focuses on mergers, but the economic principles explained here will be useful in analyzing many important issues flowing from growth of competition in electric power. For example, proper definition of markets and analysis of market power will be useful in decisions on whether to continue regulation.