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Fortnightly Magazine - May 15 1996

Moody's: Duke Stock Repurchase Stable

Lori A. Burkhart

Moody's Investors Service has confirmed the credit ratings of Duke Power Co. (DP) despite the utility's decision to repurchase up to $1 billion in stock by 2000. Moody's expects DP to maintain its 'Aa2' senior secured bond rating. DP management intends to repurchase the stock while allowing a gradual increase in the retained earnings cushion. The program was designed to absorb the substantial cash inflow caused by the reversal of the Catawba power plant purchased-capacity levelization in 1996 and by the utility's declining capital expenditure needs.

Off Peak

Martin Schweitzer and Miriam Pye

Can DSM live with

competition?

Between 1992 and 1994, demand-side management (DSM) spending grew at a median annual rate of 16 percent for a survey group of 37 electric utilities (those reporting DSM expenditures of at least $5 million for 1993). For 1994-98, however, the same utilities project a median annual decline of 3 percent in their DSM expenditures. (Taken together, the 37 utilities - located primarily along the east and west coasts and in the industrial Midwest - accounted for 51.9 percent of all DSM expenditures for U.S.

Leaseback Transaction a First

Lori A. Burkhart

Old Dominion Electric Co-op. (ODEC) has entered into a leaseback financing transaction with First Union National Bank that could save its 12 member systems about $4 million per year. First Union leased Unit One of the Clover Power Station from ODEC for 22 years with an upfront cash payment of $47.5 million, then leased it back to ODEC.

Selected Energy Stock Performance: First Quarter 1996

Annual Annual EPS

Close Close Percent 52-Wk 52-Wk Div Div Book P/E Last

Company Region 12/29/95 03/29/96 Change High Low Rate Yield Value Ratio 12 Mos.

Electric Utilities

AEP Company Inc.

Perspective

Frank Clements

Since the federal Court of Appeals decision in the Calvert Cliffs case over 25 years ago, no power plant may be built without a thorough socioeconomic impact statement. Yet, schemes to alter the entire supply system of a state - or even the nation - are currently proposed with only cursory attention to socioeconomic consequences.

Stranded Costs: Is the Market Paying Attention? (A Look at Market-to-Book Ratios)

Agustin Ros, John L. Domagalski, and Philip R. O'Connor

Investors are taking stock

of utility exposure to price competition.The utility trade press and even the general financial press have featured the views of regulators, utility executives, legislators, and various consumer advocates on the stranded-cost question. Stranded costs easily represent the most contentious issue facing the electric industry as it moves to an era of competition.

Senate Panel Continues Inquiry into Electricity'sw Future

Joseph F. Schuler, Jr.

If the new rules of electric industry competition don't permit stranded-cost recovery, the credibility of the U.S. government would be seriously undermined. Or so an executive of one of the country's largest utilities told a Senate energy panel."We just have to keep in mind we incurred these costs based under what the rules were," said Jerry Jackson of Entergy Corp. "If the government is going to change those rules . . .

Stranded Investment: Is the Sale Worth Keeping? (A Look at Utility Options)

Stan Hadley, Eric Hirst, and Lester Baxter

Giving up today's customer to retail wheeling could help cut losses tomorrow.

Estimates of stranded investment for U.S. investor-owned electric utilities (IOUs) range from as little as $20 billion to as much as $500 billion (em more than double the shareholder equity in U.S. utilities.

FERC: "High-Low" Gas Pricing Prevents Gaming

Lori A. Burkhart

The Federal Energy Regulatory Commission (FERC) has approved Texas Eastern Transmission Corp.'s (TET) proposed revisions of its monthly imbalance cash-out mechanism (Docket No. RP96-142-000).

TET had asserted in February that its monthly imbalance mechanism enabled shippers to game the cash-out mechanism during the recent rapid and large price fluctuations in the spot gas market.

Evolution or Revolution? Dismantling the FASB Standard on Decommissioning Costs

John S. Ferguson

If approved as proposed, the new accounting standard

for closure or removal of long-lived assets

will bring costs out into the open.

But is it rational?

On February 7, 1996, the Financial Accounting Standards Board (FASB) issued for comment an "Exposure Draft" of a new proposed statement of financial accounting standards pertaining to nuclear plant decommissioning and other similar legal obligations,

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