Mergers and acquisitions may inhibit the development of truly competitive utilities if newly formed, larger entities gain additional power to influence the market. This in turn creates a barrier to entry for potential competitors. It also allows the newly formed entity to engage in anticompetitive marketing and pricing practices. In addition mergers may interfere with effective utility regulation.
Mergers and Acquisitions: Policy
Effects and benefits
Policymakers should prohibit utility company mergers that compromise regulatory protection for residential ratepayers, reduce market competition, fail to increase economic efficiency, or could result in rate increases to consumers.
State policymakers should only approve mergers that are demonstrated to provide net long-term, enduring, and sustainable benefits to consumers.
Federal and state policymakers should ensure that ratepayers do not bear the costs and risks of utility mergers or takeovers.