POWER MERGER WOULDN'T BENEFIT UTAH, RATEPAYER AGENCY SAYS
BUT WOULD DROP OPPOSITION IF UP&L AND PACIFICORP AGREE TO SEVERAL CONDITIONS, INCLUDING GUARANTEED LOWER RATESUtah's Committee of Consumer Services opposes the merger between Utah Power & Light Co. and PacifiCorp, saying Utah won't share in the merger's promised benefits.
The committee, which represents residential and small-business ratepayers before the Public Service Commission, would accept the merger, however, if the utilities agreed to several sweeping conditions.Opposition comes in spite of promises by PacifiCorp that the merger would result in a 2 percent rate decrease for UP&L customers six months after the merger is approved and further reductions of 3-8 percent in the following five years.
"From the committee's analysis it doesn't appear that the 2 percent rate reduction will be long lived nor will the promise of an additional 3-8 percent rate reduction be realized," testimony filed with the PSC Wednesday said.
UP&L and PacifiCorp announced their merger last August. Under the stock swap valued between $1.8 billion and $2.2 billion, UP&L would become a division of Portland, Ore.-based PacifiCorp.
Committee economist Jeff Williams said that agency's examination of the merger found positive benefits to the parent company, but cost savings to the Utah division did not substantiate the promised rate decreases.
"The case of the applicants is optimistic, but we found between $96 million to $152 million less in savings" than PacifiCorp claims, Williams said, noting that UP&L and PacifiCorp need to show how costs and savings will be allocated to each division and jurisdiction to convince the committee that rate reductions and other savings will be realized.
The difference between approaches to reducing rates, the committee said, is PacifiCorp and UP&L place the risk of savings on ratepayers' backs "and the committee's approach is to put the shareholders' money where their mouth is," Williams' testimony said.
Williams said that if the utilities stand behind the benefits of the merger, then they should be willing to accept the committee's conditions, which include guaranteed annual rate cuts of 2 percent until 1992 and a 1 percent limit on rate hikes until 2002.
Another Utah regulatory agency, the Division of Public Utilities, has also filed its testimony on the merger, but it voiced approval of the merger on condition that PacifiCorp can guarantee the promised rate reductions.
Threats that merger benefits won't be realized have been raised by critics of the merger in every state, UP&L spokesman John Ward said. "Critics in every state are saying their state isn't getting its fair share. It's just a knee jerk reaction by the committee to obstruct anything the company does."
Ward said he hasn't read the committee's testimony or conditions to approving the merger, but he said the utilities have sworn testimony committing it to rate reductions.
"We have to lower them in order to be competitive in the future and generate new business. That is the driving force behind the merger and our cost cutting efforts."
But, committing to hold down rate fluctuations into the 21st century is a bit extreme, Ward said.
Ward explained that exactly how costs and benefits will be allocated among jurisdictions regulating the proposed utility giant, which will serve more than 1 million customers in seven states, can't be addressed in prefiled testimony but will be worked out with regulators over time.
Hearings on the merger before the Utah PSC will begin May 2.