Regulators today must define earnings for energy retailers virtually bereft of fixed assets.
Charles J. Cicchetti and Colin M. Long
Applying the traditional rate-base concept to the new hybrid companies is where the gap between the old and the new regulatory paradigms resembles a deep schism. The current shifts in regulation should cause regulators to revisit and reconsider concepts that once reigned supreme in ratemaking.
How online monitoring can prevent costly failures.
The march of technology, the urgent call for greater grid investment, and a painful recent past have caught up with the utilities industry. One key area of preventative maintenance for utilities is the transformer, many of which are decades old. Representing approximately $200 billion in investment, these units—which currently number approximately 100,000—can’t be replaced overnight.
Retaining mid-career personnel will be important to a utility’s success.
Michael Brown and Sasha Lazor
With upward of 50 percent of the utility industry’s workforce approaching retirement, the industry’s leadership, at all levels, must come to grips with this enormous challenge. This looming demographic challenge is not simply a human-resources problem. For most of the industry, it poses a very real threat to the bottom line and touches upon the fundamental ability of the company to pursue its mission. The path to survival will require non-traditional thinking around all the people levers—staffing, work planning, compensation, work processes, performance management, development, job and organization design, and, most important, leadership.
Utilities must trim the fat from excessive stock options, stock grants and executive pay.
Richard Stavros, Executive Editor
This month’s cover story focuses on how utilities intend to find the talent they’ll need over the next few years to replace all those retiring baby boomers. And part of that puzzle naturally involves executive pay: how to attract the best and brightest without going overboard on rewards for performance.
(July 2006) The New York Independent System Operator named Rana Mukerji to serve as vice president, market structures. CMS Energy elected Jon E. Barfield as an interim appointee to the company's board of directors and also re-elected 10 incumbents. Pepco Holdings Inc. elected Frank O. Heintz and Lester P. Silverman to the board of directors. TXU Corp. elected the following directors: E. Gail de Planque, Leldon E. Echols, Kerney Laday, Jack E. Little, Gerardo I. Lopez, J.E. Oesterreicher, Michael W. Ranger, Leonard H. Roberts, Glenn F. Tilton, and C. John Wilder. And others...
Some power markets may be seeing possible signs of recovery. Spark spreads appear to have bottomed out, and reserve margins have begun to fall in some markets. As Figure 1 shows, recovery is uneven, with many regions still experiencing excess supply and a few regions with peak reserves under 10 percent.
Three reasons to make them a permanent part of U.S. energy policy.
For the past decade, the renewable energy industry and various branches of the federal government have engaged in an ungainly, enormously unproductive two-step on production tax credits (PTC) for renewable energy projects, and for wind projects in particular. The PTC can be transformed into a keystone of an effective energy environmental policy. However, to achieve this transformation, the misperceptions must be challenged.
Michael R. Yogg, who manages Putnam's Global Utilities Fund, explains what investors want from the sector.
Is the love affair with utility stocks cooling? A Standard and Poor’s equity research report in late May included a negative outlook for electric utilities: “We think the sector will underperform in 2006, weakened by the rising interest-rate environment,” the report said. But not all investors agree. We talked with veteran portfolio manager Michael R. Yogg of Putnam Investments, who revealed how the modern-day investor views the utilities sector.
Eleven questions to ask senior managers about their risk-management objectives.
Brett Friedman and Tim Essaye
It is almost impossible to design an effective hedge program without first determining the exact objectives a company wants to achieve. Although this sounds obvious, it rarely is. Management usually can agree that the firm should hedge to reduce risk, but “risk” is too vague a term to justify hedging on its own.
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