Utility consolidation is likely to continue in the wake of several recently announced mega mergers. When the dust settles, the number of utilities in the U.S. could be whittled down from the current number of over 100 to 50 in less than five years, Constellation Energy CEO Mayo Shattuck said.
"The utility consolidation trend is likely to continue," he said at the company's 2005 annual shareholders meeting. "Generally we view this as a good thing."
He noted that in Japan, "a country with roughly half our population, there are seven major utilities. In the United States, we have more than 100. For the sake of productivity and efficiency, it certainly makes sense to reduce that number from 100."
Shattuck said that "there are many regulatory issues governing this area and recent court decisions have put some in a state of flux. But I do think we'll have consolidation, and probably in the neighborhood of fifty utilities in less than five years."
Several major proposed energy mergers have been unveiled in recent months -- Exelon-Public Service Enterprise Group (PSEG), Duke Energy-Cinergy and, most recently, MidAmerican Energy-PacifiCorp last week (see related story).
Addressing competition issues, Shattuck noted that what's driving Constellation's bullishness on competitive markets is increasing customer demand. "Customers today are demanding the best price, best products and best service. The business proposition's fairly simple. The company that delivers on these demands captures market share and grows."
The CEO said it's "not hard to see what's driving customer interest. We are in a period of skyrocketing commodity prices, with record run-ups in the cost of oil, natural gas and coal."
Shattuck said that with respect to wholesale power auctions, Constellation intends to compete in these auctions "and we think we'll win our share."
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