The Problem
Over the last 30 years, electricity markets have been structured to incentivize concentration and consolidation. From 1995 to 2012, the number of investor-owned utilities fell by more than half due to merger activity, while electricity use increased by 20 percent. While investor-owned utilities constitute only 6 percent of the total number of utilities in the U.S., they serve more than 70 percent of customers.
This level of consolidation causes many harms, giving monopoly utilities outsized power to increase rates, enrich shareholders, and diminish regulatory oversight. Additionally, after mergers occur, the utility often files a significant rate increase while shedding jobs. For example, months after Dominion Energy completed the buyout of South Carolina utility SCANA, the utility began to offer voluntary retirement packages to employees and then proposed a 7.75 percent rate increase.
These large utilities become, in some sense, not only too big to fail but too big to manage, enabling them to elude accountability for diminished services and response times.
The Solution
States should implement a ban on utility mergers over a certain size to prevent excessive consolidation. Specific size thresholds, based on market share, revenue, or customer base, would be defined utilizing a public interest framework as determined by the Office of the Attorney General.
States should also craft merger guidelines ensuring that any mergers falling below those thresholds meet specific public interest measures, akin to the statutes states such as Minnesota have adopted governing hospital mergers.