A new way to measure what matters most: how close a unit comes to meeting its total potential profit.
Tom Ottem and Michael McNair
Approximately 65 percent of capacity additions in the last few years have been gas-fired, combined-cycle units. Recent market conditions have been hard on these new resources, which have suffered from significantly low capacity factors. A better metric would measure a unit's ability to capture peak prices while minimizing shoulder period and off-peak losses. Furthermore, it would measure the extent to which a unit dispatches according to favorable market conditions.
And for a reasonable regulatory policy for new broadband technology.
Charles A. Zielinski
To achieve the benefits of broadband over power line communications platforms, policy-makers must resolve a number of issues, including: (1) harmful radio interference; (2) access; and (3) cross-subsidies. If their policies impose diseconomies on the operation, design, or financial structure of BPL, widespread deployment of the technology is unlikely.
Should transmission owners get paid extra for distance and voltage?
While the Midwest now appears set on competitive bidding for the electricity commodity, taking from PJM such tried-and-true elements as locational marginal pricing, financial transmission rights, and a day-ahead market with a security-constrained dispatch, the region remains split over the pricing of transmission.
Value Line projects that total capital for electric utilities will increase about 12 percent during the next several years, while common equity will increase nearly 28 percent. Similarly, natural gas distribution company total capital is projected to increase about 10 percent, and common equity close to 15 percent. For both industries, the median common equity ratio in the near-term future for companies with investment-grade rated subsidiaries is in the range of 51 to 52 percent. For utilities, higher equity ratios are desirable for several reasons.
The need for additional generation to compensate for wind variations is disappearing.
Ron L. Lehr
Utility-based studies have laid to rest the concern that a wind plant needs to be backed up with an equal amount of dispatchable generation. Even at moderate penetrations, ancillary services to back up new wind power need not be more than is required of a system as a whole.
Financial data raises doubts about whether deregulation benefits outweigh costs.
This year, U.S. electricity consumers will spend more than $1 billion financing the operation of six RTOs. RTO costs have nearly doubled since 2001. Restructuring the energy industry was more costly and more risky than anticipated, and reasonable estimates of RTO costs outweigh nearly all of the benefits anticipated.
The industry is going down the mark-to-market route, creating significant opportunities for earnings swings and distortions.
John Bampfylde and David Shimko
Domestic and international groups have pushed the industry toward mark-to-market accounting, creating significant opportunities for earnings swings and distortions and making good model risk management more essential now than ever before.
At a posh dinner event and conference, industry experts speculate on the issues that could affect the industry in 2005.
It was the most exclusive, and one might say, one of the most extraordinary dinners. Never have I seen so many prominent CEOs, regulators, and financial gurus all in one room, discussing the future of the electric industry.
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