The electric utility industry, once the steadiest, stodgiest business around, is charged up for change.
A 3-year-old federal law that potentially gives customers more choices in electricity vendors has the $190 billion industry talking of competition, mergers, winners and losers.
The news last month that Northern States Power Co. would merge with Wisconsin Energy Corp. switched on the juice in both those companies' stocks and renewed analysts' predictions of similar alliances across the country.
"There's a lot of scuttlebutt going on in the industry nationally," said J. Steven Herod, director of energy-power regulation for the Federal Energy Regulatory Commission in Washington. "It's kind typical of the era we're in now."
In few places is speculation stronger than that involving Baltimore Gas & Electric Co. Stock analysts and BGE employees believe that the company may be considering a merger or other business combination with Washington-based Potomac Electric Power Co.
"Rumors of BGE and Pepco have circulated on and off for a number of years," said Alex Hart, utility analyst for Ferris, Baker Watts Inc. in Baltimore. Lately, though, he said, "apparently it's just rampant running around the halls of Potomac Electric and BGE that something is going on between the two of them."
Officials at both utilities would neither confirm nor deny that merger talks are taking place. Several directors at both companies declined to comment.
"In today's environment of increasing competition and regulatory changes, it is only prudent for utilities to explore various alternative ways of doing business," BGE said in a prepared statement.
Pepco's stock price has risen by 15 percent since early January, closing yesterday at $21.13 per share. BGE went from $22 in January to $26.50 earlier this week, before settling back to $24.50 yesterday.
There are compelling reasons why utilities might want to examine their options and why a BGE/Pepco match might make sense.
Pepco, whose profits have been uneven in recent years, could use the financial assistance that stronger BGE could provide. BGE would get extra capacity and, because of Pepco's line connections, a better chance at selling electricity to the rapidly growing South, analysts said.
For both companies, a friendly merger might yield an entity big enough to be protected from hostile takeover. And most important, a merger could yield cuts in administrative costs that would allow more-competitive rates from the combined company an increasingly competitive field. That means job reductions.
