By Gregory Palast for The Observer/Guardian UK
Scottish Power’s troubled takeover of United States electricity company Pacificorp is under further pressure this weekend. Veteran consumer campaigner Ralph Nader is preparing legal action to block it, while tougher limits on profits threatened by US regulators could make the deal unviable.
Nader’s organisation will act for the North East Ratepayers Group of Portland, which fears the £4.7 billion proposed merger threatens the exceptionally low electricity prices enjoyed by 1.4 million Pacificorp customers in Oregon and Utah.
Wenonah Hauter, director of Nader’s Critical Mass Energy Project, confirmed its plan to challenge this first foreign takeover of an American utility. Until now, the US Public Utilities Holding Company Act has barred control by overseas firms.
Scottish Power would not comment, but one expert on the Act believed a challenge would fail because the US Securities and Exchange Commission ‘has torn the law to shreds. They’ve basically stopped enforcing it.’
Last week the ratepayers, working with Nader and more than a score of consumer, labour and environmental groups, filed the challenge to the takeover with the Oregon regulator. Several of Pacificorp’s big industrial customers joined them.
Nancy Newell, the ratepayers’ leader, said they did not expect to prevent the merger, but wanted to restrict Scottish Power’s ability to raise prices or sell Pacificorp property.
This is not the UK company’s only problem. Utah and Oregon regulators have prepared orders that would rob it of a free hand to recover the £2 billion premium over book value implicit in the merger.
Utah’s Utility Commission is expected to issue a ruling within weeks that would significantly cut the legal profit cap on electricity sales. And insiders at the Oregon body say it wants to follow suit.
This is a severe blow to Scottish Power’s plans to make the merger profitable. The Glasgow-based company, announcing the deal on 24 December, said it was counting on the higher profits cap.
Worse, the Oregon commission last week barred both the sale of hydro-electric dams and the export of cheap power from the state – a move seen as eliminating much of Pacificorp’s value to the UK firm.
The same regulator later demanded details of price cuts – a condition of entry to the market which Scottish Power had wanted to avoid. Roger Ball, a Utah state official, said: ‘I don’t see how they recover their premium. But that’s not our problem.’
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Gregory Palast’s column “Inside Corporate America” appears fortnightly in the
Observer’s Business section. Nominated Business Writer of the Year (UK Press
Association – 2000), Investigative Story of the Year (Industrial. Society – 1999), Financial Times David Thomas Prize (1998).