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CEOs on Change

Utilities adapt to a shifting landscape.

Fortnightly Magazine - June 2009

rather than when public capital markets are accessible.

“From our standpoint, we solved our capital requirement challenges,” Reynolds said. “We don’t have to worry about where we’re going to get financing. With our committed capital [at least $500 million, per the terms of the acquisition] we can work to execute our plan.”

Additionally, the merger prompted rating agencies to raise PSE’s corporate credit ratings higher into the investment-grade category, strengthening the company’s financial position. However, just because PSE has access to deep-pockets financing from its new owners doesn’t mean the company’s financial worries are over. PSE still must gain regulatory approvals to put investments into its rate base. The Washington Utilities and Transportation Commission (UTC) conditioned its approval of PSE’s acquisition on $100 million in rate credits and other savings over 10 years. PSE recently announced it would pass through gas-price savings to its customers in a 12.5 percent gas rate reduction. But while fuel cost reductions will help, ultimately the company’s multi-billion dollar investment plan will impact ratepayers’ bills—assuming regulators approve it. In that regard, PSE has the advantage of operating in just one state, which will help the company manage regulatory risk.

“We have a very positive, forward-thinking regulatory commission,” Reynolds said. “We’re following the law in meeting the RPS requirements, and our relations with the commission are positive.”

When asked what lessons he’s learned over the past several years, Reynolds said, “Listen to your customers. Too often people in our industry have decided what they think is best for customers, and then crammed it down. We’ve tried to listen and learn from what our customers, communities and elected officials are saying, and then tried to adopt a strategy to do that. That’s allowed us to be a first mover, and to do it in a positive way, united with our customers.”

CEO’s Guide to Change

Visit www.fortnightly.com for full transcripts from these interviews, and watch for future installments in our series, “CEO’s Guide to Change.” Next up: Christopher Crane, Exelon Corp.

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