What is a director's legal role in utility consolidation

Moderate economic growth coupled with an increasing emphasis on power conservation has made it more difficult for electric utilities to increase revenues. In addition, utilities are no longer declining-cost industries, so the lower expenses now necessary for higher profits are more difficult to achieve internally. The Public Utility Regulatory Policies Act of 1978 and, most recently, the Energy Policy Act of 1992 have increased competition in the generation and wholesale transmission of electric power. Moreover, retail wheeling is now actively being considered by some state regulatory authorities. These forces combine to make the idea of consolidating with neighboring utilities more attractive. Consolidation could enable two or more electric utilities to reduce their combined costs of fuel, capital, labor, purchasing, and administration; defer new generating capacity; and benefit from each other's transmission interconnects and existing and potential markets. The result can be a more profitable, more competitive business. This article examines the legal responsibilities of company directors in such consolidations.