Frontlines
What's a Utility?
Never before have investors known less about what their company is up to.
How many different types of "utility" companies can you name? Which ones would you trust the most to double or triple your investment nest egg? Which ones make you nervous?
Both look overseas for project developers, but some U.S. firms worry they'll miss out.
The top traders, investors and managers tell why energy convergence is still a pipe dream.
[Graphic tables included in the print version of the Fortnightly are not included in this electronic version.]
Energy investors seemed less willing in 1999 to greet electric/gas combination mergers with the kind of blind enthusiasm they tended to show in prior years.
Instead, they now demand proof that energy convergence really does create tangible value beyond the mere sum of the parts. At least that's the impression gained from talking with John W.
State PUCs
T+D Investment Risk. The Maine PUC appeared to take a pro-consumer stance in setting principles it will use to set a revenue requirement for transmission and distribution (T&D) services provided by Bangor Hydro-Electric Co. after the company becomes a wires-only utility on March 1. The PUC downplayed the risk of wires operations, adopting a return on equity of 11 percent and disallowing about $3.5 million of some $71 million in claimed T&D costs.
An industry booster looks at the forecasts for price and technology and sees some big "ifs" for modular, on-site and distributed applications.
I'm a believer from way back in using natural gas for modular, on-site and distributed generation. But I worry that we might be overselling it.
Certainly, the idea of a natural gas fuel cell in every home basement needs careful examination. Add to that the notion that we can replace much of our commercial power demand with gas-fired systems such as fuel cells and microturbines.
State PUCs
Gas Capacity Rights. The New York PSC told retail suppliers that to serve firm retail gas load they must have rights to firm, non-recallable, primary delivery point pipeline capacity for the five winter months, November through March, or else must augment secondary capacity with a standby charge payable to local distribution companies holding primary rights.
Sales prices for power generation assets in the United States during the past two years have climbed to unprecedented levels. This trend should continue. More than 20,000 megawatts of generation assets have been sold, with another 20,000 MW announced. During the next five years, it is expected that 70,000 to 140,000 MW will change hands. We have seen only the beginning of a massive redistribution of generation assets - from regulated utilities to unregulated marketers and plant operators.
In fact, the prices we've seen for generation assets may turn out to be bargains.
State PUCs
Distributed Generation. California opened a rulemaking proceeding to consider regulatory reforms in electricity distribution service, with a possible focus on distributed generation. The commission emphasized that its intent was not to define new policies, but to gather information. Comments are due March 17, and the commission intends to consider a proposal from the assigned commissioner this summer. Rulemaking 98-12-015, Dec. 17, 1998 (Calif. P.U.C.).
Gas Transportation Rates.
Robert W. Shaw JR. IS A BETTING MAN. Shaw's Aretê Corp. venture capital fund has invested $100 million in energy technology. This year the Center Harbor, N.H., fund set aside $30 million to invest in micro-generation technologies. Already the fund has pumped hundreds of thousands of dollars into more than a half-dozen companies trying to develop microturbines, fuel cells and other promising small-scale generation.
"This is a hot corner," Shaw says.
Shaw bucks naysayers like Ralph Selvig of VentureOne Corp., a San Francisco firm that tracks the venture capital industry.
PURRED BY FLAT POWER DEMAND AT HOME IN RESIDENTIAL and industrial markets, U.S. utilities are taking huge risks in Latin America. Why? They are enticed by the promise of high-yield returns on generation, distribution and transmission deals.
Yet only some of the companies getting in on the ground floor of privatization or winning concessions in the Latin American energy market stand to make huge profits. Others, too slow to beat competitors, or not savvy enough to skirt political and regulatory land mines, could lose their shirts.