The players and judges who can make or break the billion dollar merger between Utah Power & Light Co. and PacifiCorp will begin their final performance Monday as Utah's Public Service Commission opens 15 days of hearings on a merger that could affect nearly every individual, business and government entity in the state.
Merging UP&L and PacifiCorp would create one of the largest utilities in the West, serving more than 1 million customers in seven states, and Utah is the last jurisdiction where opponents and proponents of the merger will square off.Since announcing their intended marriage last August, officials from UP&L and PacifiCorp have presented their case before regulators in Montana, Wyoming, Idaho, Washington, Oregon, California and the Federal Energy Regulatory Commission. The commissioners in Wyoming, Idaho and California have approved the merger.
But Utah officials say the decisions of other states won't play a role here. The stakes are relatively small elsewhere, when compared to the fact that the merger would impact at least 75 percent of Utah's population and make the state's 75-year-old home-grown utility a division of a Portland, Ore.-based company.
"This state has more to win or lose than any other," PSC chairman Ted Stewart said. "In terms of its overall impact I can't think of anything else we have dealt with that could impact the state as a whole more than this does. The need for safe, economical power is important to the state and its individuals."
Financial analysts and other utilities observing the merger from out-of-state are also giving Utah extra attention.
"I am watching the Utah commission more than the others," said Greg Enholm, utilities stock analyst
for Salomon Brothers Inc. "The Utah commission is considering allowing the state's largest utility to be merged with a utility it has no experience with. They will be careful in making that decision."
The widespread in-state impact of the merger is evident in the reams of testimony already filed with the commission by parties representing consumers, industry and local government.
Stewart said the commission will consider the opinions of at least 29 witnesses scheduled to take the stand either for or against the merger. The PSC will also consider comments from the general public during a public witness day scheduled May 9.
After hearing the various opinions, the three-member commission must come up with a net result, either for or against.
In pre-filed testimony all the intervenors in the case have slapped numerous conditions on the merger before giving it their approval.
Among them is that UP&L and PacifiCorp guarantee to stay true to their promise that UP&L rates will drop 5 to 10 percent within five years after the merger and rates remain stable thereafter.
The two utilities contend that their commitment to cutting electricity costs isn't a hollow promise to buy regulatory approval. "We have to cut rates to stay in business and the merger is a way to do that," UP&L spokesman John Ward said. "We aren't just being nice guys by cutting rates, we are trying to become a better business."
UP&L and PacifiCorp claim that combining their operations will result in savings that can enable them to decrease rates.
But some opponents question that claim and demand that the merged utility spell out how costs and benefits of the merger will be allocated to each state to be certain Utah gets its fair share. They also advise the commission not to be blinded by promises of rate reductions, disregarding the fact that UP&L will become a division of a company whose purse strings are tied to headquarters in Portland.
Stewart said that in his opinion the cost allocation issue can't be dealt with now. But he added that the issue must be addressed before the end of the year and Utah regulators must be assured they will have authority over allocation of costs and benefits in order to approve the merger.
Regulatory control is of particular importance to the commission, Stewart said, and conditions on that issue will most likely be required for the merger to go through. "Utah stands to lose more control than does any other state" served by either utility, Stewart said.
With regard to relationships with the state's publicly owned utilities, most of those concerns were heard before the FERC because they involve shared use of the merged utilities' vast transmission system. But Stewart said the FERC ruling, due in June, will influence Utah's decision.
Conditions established by the FERC could affect the merger's benefits flowing to UP&L and its ratepayers.
While the Utah hearings are important, UP&L and PacifiCorp have been through the process in six other states and the FERC, and don't expect any surprises here. "Utah may look at it from a different angle and emphasize some issues differently, but as far as the basics of the merger go we've presented them in seven other forums and our answers will be the same," Ward said.