(September 2009) The industry’s best companies are weathering the financial storm reasonably well, with the F40 delivering equity returns in the 14-percent range for fiscal 2008....
Studies and Reports
Natural Gas Retail Choice. Utility affiliates hold large market shares in natural gas customer choice programs, raising questions about the extent of true competition, according to a study released on Dec. 15 by the U.S. General Accounting Office. Participation varies by region, however, according to the report, "Energy Deregulation - Status of Natural Gas Customer Choice Programs."
In Pennsylvania, for example, three out of four programs showed very high shares for utility affiliates. The Equitable Gas Co. affiliate served all 42,000 residential customers who participated in the utility's choice program as of Aug. 31, 1998, according to the GAO. As of July 31, the Peoples Gas affiliate served 79 percent of participating residential customers. Only under the Columbia Gas program did the affiliate not serve the largest market share.
In Nebraska, however, the local gas utility sponsoring the state's single program estimated that 70 percent of eligible residential customers had selected an alternate gas provider, while in New York, a local gas utility sponsoring one program reported that no residential customers had selected an alternative supplier.
The GAO counted 43 gas utilities in 16 states having customer choice programs in place. Meanwhile, gas utilities in 11 other states and the District of Columbia either were beginning or considering implementing choice programs. More information is available at the GAO web site, http://www.gao.gov.
Hydroelectric Development. The National Hydropower Association estimates that up to 20,915 megawatts of additional capacity could be developed by 2010 without building a single new dam or impoundment - but only if changes are made to the licensing process, which now discourages development, according to the NHA.
Ninety-seven percent of the nation's 75,000 dams are without hydropower capacity, as noted in an NHA report, "Forecast for Hydropower Development Through 2021." Thus, development of only a small fraction of those existing dams would meet NHA's forecast. Also, that new capacity would offset about 24 million metric tons of carbon emissions from the burning of coal.
Stranded Costs; Securitization. Moody's Investors Service reports that for Illinois electric utilities, securitization of stranded costs will pose risks not seen previously in securitization deals in California. The reason stems from unique political, legal and structural characteristics for Illinois deals, according to a recent report, "Illinois Stranded Utility Costs Securitizations: Are All Transactions Created Equal?"
In Illinois, notes Moody's, the instrument funding charge (which repays bondholders) will come out of existing utility rates, rather than from a separate dedicated levy, as in California. Moreover, under Illinois law, a legislative "inseverability provision" dictates that if any part of the state's restructuring legislation is declared unconstitutional, the entire act will be held invalid, which likely would void any securitization deal.
Commonwealth Edison Co. and Illinois Power Co. were expected to issue $4.3 billion of "Aaa-rated," debt to securitize costs left stranded in Illinois. Nationwide, Moody's estimates that utility securitizations in 1999 could total between $50 billion and $75 billion.
Gas Pipeline Construction. The U.S. Energy Information Administration reports that expenditures for natural gas pipeline construction will rise significantly in 1999 and 2000 - up to