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Fortnightly Magazine - January 2008

California: Mandating Demand Response

California’s load-management experience argues for formal DR standards

Jackalyne Pfannenstiel and Ahmad Faruqui

California hopes to reap $3 billion in benefits from demand response over the next 20 years. Maximizing the potential may require the California Energy Commission to exert its statutory authority. CEC’s chair co-authors.

Duke's Fifth Fuel

Conservation investments benefit participants and non-participants alike

Charles J. Cicchetti, Ph.D.

For-profit energy efficiency programs are coming. Duke Energy proposes to align the interests of shareholders and retail customers within an expanded least-cost approach. Convincing regulators will require taking a holistic view of the costs and benefits.

What Price, Security?

Grid reliability depends on ‘reasonable business judgment’

Michael T. Burr, Editor-in-Chief

The word “security” no longer means what it used to mean. Now, “security” means gates, guards and guns. It means protecting critical assets with a multi-layered cyber and physical perimeter. It means exercising vigilance and caution, and accepting inconvenience as a matter of routine.

Letters to the Editor

Before the hearings started, I felt the number of critical cyber assets for a medium size utility would be on the order of several thousand, not 20 as some major utilities are identifying under the CIP standards. This should be a red flag for the industry.

Texas Ring Fence

TXU’s buyout structure creates a potential model for utility M&A and refinancing deals

Terry A. Pratt

2007 was a big year for TXU Corp., as it went private in the largest leveraged buyout in history. To sweeten the deal for environmentalists and regulators, TXU made structural and financial concessions. Now TXU’s ring-fencing structure might become a template for future utility M&A and refinancing deals.

Setting the Standard

NERC’s new cyber security rules may minimize cost of compliance, but they leave utilities guessing on how to identify risks.

Bruce W. Radford

Liam Baker, vice president for regulatory affairs at US Power Generating, questions whether his company’s power plants and control systems in New York and Massachusetts must comply with the electric industry’s new mandatory standards for cyber security. Baker voiced his doubts in written comments he filed in October with FERC.

Linking Risk and ROE

Financial-risk coverage is falling short in utility returns

Donald Murry, Ph.D. Zhen Zhu., Ph.D. and Michael Knapp, Ph. D.

When setting the allowed returns on common equity of jurisdictional utilities, state regulatory authorities apply the virtually universal standard that the allowed returns should be similar to returns on common equity investments in companies of equivalent risk. Such returns generally are accepted as fair if they are no higher than necessary and still sufficient to attract investment. Despite the universality of this regulatory standard, our investigation of recent allowed returns by state commissions shows that a key risk—financial risk—as measured by accepted, measurable metrics, has not been a factor affecting the level of allowed returns in the United States in recent years.

People

 

 

Duke Energy named Lynn J. Good group executive and president – commercial businesses. AGL Resources announced John W. Somerhalder II, the company’s president and CEO, has been named chairman of the board. Energy West announced several changes in its management team. And others...

Post-Meltdown Valuation

Credit-quality concerns join fuel and market factors to affect power-plant valuation

Devrim Albuz and Gary L. Hunt

Lenders know there are billions of dollars of weak financial assets in the market, such as securities backed by bad mortgages. The problem is no one knows who is exposed at what level to those weak financial assets. This causes a lack of confidence in the lending industry, and a credit crunch that — if unabated — could cause a recession.

Nuclear Spin

Entergy’s $20 billion spin-off plan elicits yawns on Wall Street

Michael T. Burr

(January 2008)Entergy Corp.’s announced plan to spin off about 5,000 MW of nuclear assets generated a major buzz when it was announced in early November.

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