Merger commitments and conditions generally fall into several categories as summarized below.
- Guaranteed Customer Benefits – immediate rate credits, rate freezes/rate case stay outs, sharing of merger synergies, write down or off regulatory assets
- Customer “Hold Harmless” Provisions – commitments that retail rates, cost of capital and return on equity, service or parent company allocations will not increase
- Operations and Customer Service – general commitments that service will be maintained or improved, specific commitments to defined performance (e.g., SAIDI, SAIFI, call center), commitments to defined levels of capital spending
- Financial and Ring-Fencing – separate capital structures, financing and credit ratings, no guarantees, pledging of assets or cross-collateralization of debt, no co-mingling of assets, utility dividend restrictions, actions if utility credit rating is downgraded as result of transaction, Board composition, and other governance restrictions
- Ratemaking, Accounting and Tax – timing of next rate case, treatment of goodwill and goodwill impairment, transaction costs, transition costs, merger accounting, tax elections, future tax treatment
- Employees – maintenance of compensation including salary, incentives, and health and welfare benefits, no involuntary termination, all for a defined period of time, and creation of employee development programs
- Local Management – maintenance of local management, local regulatory staff, local management’s input on capital and operating budgets
- Other Local Considerations – maintenance of local offices and control centers, support for local colleges, universities, and businesses
- Energy Policies – maintain or enhance existing or emerging energy policies including environmental, renewable resource, distributed generation, and energy efficiency
- Social Policies – maintain or enhance low-income customer programs, ongoing charitable contributions, and support for other local programs
- Affiliate Interest and Code of Conduct – compliance with existing or updated codes of conduct and cost allocation manuals, merger-specific commitments regarding affiliate activities
- Competition – ensuring that the transaction will not have a negative impact on competitive energy markets
- Other – other commitments addressing concerns specific to the merger, the stakeholders, and/or the jurisdiction
While the categories of commitments and conditions may be consistent across a number of mergers, an individual merger’s specific commitments and conditions should reflect its unique characteristics.