February 8, 2007: PSC Approves Risky Merger between WPSR and Peoples
For Immediate Release: February 8, 2007
PSC Approves Risky Merger between WPSR and Peoples
MADISON – The Citizens Utility Board is disappointed with the decision made today by the Public Service Commission of Wisconsin (PSC), which approved the merger between WPS Resources Corporation and Peoples Energy Corporation.
WPS Resources Corporation (WPSR) is the holding company that owns Wisconsin Public Service Corporation, a regulated utility that sells electricity and natural gas in the Green Bay area. Peoples Energy Corporation (Peoples) is the holding company that owns two regulated utilities that sell natural gas in Chicago, namely Peoples Gas Light and Coke Company and North Shore Gas Company. WPSR and Peoples announced their intent to merge on July 10, 2006.
In proceedings before the PSC, CUB objected to the merger because mergers rarely if ever provide benefits to the ratepayers of the utilities involved in the merger. Like other utility holding companies that have proposed mergers, WPSR has made promises that “synergy savings” resulting from more efficient utility operations will outweigh the costs of the merger and provide benefits to ratepayers. In its filings in the proceedings, CUB pointed out that three-fourths of mergers fail to provide benefits to the acquiring company’s shareholders, let alone ratepayers, and that “synergy savings” rarely provide any benefit to ratepayers.
“Utility mergers almost always enrich utility executives while causing higher rates for ratepayers and the loss of jobs of utility workers, and this merger will probably turn out the same” said Charlie Higley, CUB executive director.
In addition to criticizing the often fictional “synergy savings” promised by utility management, CUB raised concerns about problems afflicting the utilities owned by Peoples. For starters, Peoples Gas Light and Coke Company and North Shore Gas Company had to provide a refund of $100 million swindled from their customers in a shady deal involving Enron Corporation. Next, the Peoples Gas utility has very old gas pipes, with some dating back to the Civil War. Not only have there been explosions on the Peoples Gas system, but repairs and replacement of old pipes located under the streets of downtown Chicago will be very expensive, posing liability threats to its new owners.
“The merger between WPSR and Peoples won’t provide benefits to Wisconsin ratepayers, and the PSC made the wrong choice in approving the merger,” concluded Higley.