Mergers and Acquisitions


Mergers and acquisitions in the telecommunications and energy industry are common. Often, they occur when a large utility or holding company buys a smaller utility. This can result in a large, multi-state ownership structure. Mergers and acquisitions therefore have the potential to make state and local regulation more difficult. This is especially the case when a utility transfers call centers and back-office work to affiliates, or when foreign-owned directors and shareholders pressure the local utilities to reduce costs and increase earnings. 

Mergers of competitors or related companies can also increase their market power and reduce competition. As a result, they require approval from both state and federal regulators. Regulators determine whether a proposed merger might otherwise harm consumers, such as through higher prices or worse service quality. 

Regulators evaluate whether a merger would allow the newly formed company to engage in marketing and pricing practices that could disadvantage consumers. They also examine whether the merger or acquisition would make it difficult to regulate the industry. In addition, they consider whether to condition approval of the merger or acquisition upon the company’s agreement to engage in actions for the benefit of consumers, such as agreeing to expand certain service offerings, improve customer service performance, or invest in networks. 



Utility company mergers

Policymakers should only approve mergers that demonstrate net long-term, enduring, and sustainable consumer benefits. 

Mergers that threaten regulatory protections for residential ratepayers should be prohibited, as should mergers that do not increase economic efficiency. 

Mergers that reduce market competition or possibly lead to residential rate increases should not be permitted. 

Policymakers must ensure that ratepayers do not bear the costs and risks of utility mergers or takeovers.