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The New CEO's

Michael G. Morris
Fortnightly Magazine - June 2004

power that we can generate. In fact, our unregulated generation business is essentially sold out. And because we are making the transfer now, they have less to sell. So, it wasn't done for competitive reasons at all. It was done because Missouri wanted the regulated utility to own that generation, and we agreed to it as part of a rate settlement.

Why would the state prefer regulated generation to unregulated generation?

The line of thinking is something like this. If a company has managed its generation well and demonstrated that it can manage that, and do it at very low cost, then the utility customers are better served with a regulated supply then with an unregulated supply, where you are exposed to the market price. The thinking 10 years ago might have been that wherever there is competition the market price is always going to be lower than a cost-based price. That isn't true if you have got a cost-based price from a low-cost utility company. … Our rates here in Missouri are among the lowest in the United States, and our generation cost is very low and is likely to be below market price. So, the thinking is that if the generation is rate-based it will ultimately be a better deal for customers then if the utility buys the power at the market price.

What is the value of Ameren joining the Midwest ISO?

Well, we are a Midwest company. When we look at our options for being part of an RTO, we've been part of Mid-American Interconnect forever. It makes sense for us geographically to be part of the Midwest ISO. I don't put any stock at all in rates rising, especially for states like Missouri. The generation that Union Electric, our Missouri utility company, owns is committed first to the Missouri market. If we can sell additional power to other states, any gain that we make there is a short-term gain. That money goes to offset customer costs and goes to make our rates lower in Missouri. The value really doesn't go out of state.

Dennis R. Wraase

President and CEO, PEPCO Holdings Inc.

The Executive

Age: 60
Education: Bachelor of Science, Accounting, University of Maryland; Master of Science, Finance, George Washington University
Board Memberships: Executive board member, National Capital Area Council Boy Scouts of America; director of Southeastern Electric Exchange, Assoication of Edison Illuminating Cos., Washington Performing Arts Society, Maryland Chamber of Commerce, University of Maryland Foundation, the Robert H. Smith School of Business at the University of Maryland - Board of Visitors.
Earlier in Career: Vice president and comptroller, PEPCO, 1985; senior vice president and CFO, PEPCO, 1996; executive vice president and CFO, PEPCO, 1999. He previously served at Exxon Corp.

The Company

Market Cap End of 2003: $3.4 billion
Revenue 2003: $7.3 billion
Net Income 2003: $113.5 million
Employees: 5,719

You were CEO for only 5 months on the job when Hurricane Isabel hit, what did you learn from your trial by fire?

What we learned is that we had perhaps lost touch with the expectations