Assessing Corporate Restructurings in the Electric Utility Industry: A Framework
NRPI Quarterly Bulletin
Corporate restructurings of electric utilities in the United States have become an important and controversial issue during the 1980s. Regulators and electric utility executives have different perspectives concerning corporate restructurings associated with diversification, mergers, and functional separation of generation, transmission, and distribution. Regulators attempt to regulate electric utilities effectively in order to assure that adequate electricity services are provided at reasonable cost and to protect the public interest which includes considering choices and risks to customers. Regulators are considering and developing new regulatory approaches in order to address corporate restructurings and balance regulation and competitive pressures. Electric utility executives typically view corporate restructurings as a potential partial solution to financial challenges and problems and are analyzing corporate restructuring activities within the framework of the corporate strategic planning process. Executives attempt to find new sources of economic value and consider risks and potential returns to investors in an increasingly competitive environment. The parent holding company is generally used as the basic corporate form for restructuring activities in the electric utility industry. However, the wholly-owned utility subsidiary structure remains in use for some restructurings. The primary purpose of this paper is to propose a framework to assess corporate restructurings in the electric utility industry from a public policy perspective. This paper is organized in the following manner. First, different types of corporate restructurings in the electric utility industry are examined. Second, reasons for corporate restructuring activities are represented. Third, a framework for assessing corporate restructuring activities is proposed. Fourth, the application of the framework is discussed.
J. Robert Malko, “Assessing Corporate Restructurings In The Electric Utility Industry: A Framework,” appears in NRRI Quarterly Bulletin, Vol. 17, No. 4, Winter 1996-97 issue.