New air quality regulations, including the Cross-State Air Pollution Rule, have prompted substantial investments in emission control upgrades. But a series of additional standards—for mercury, toxins, cooling water and ash residue—are driving delays and shutdowns in the coal-fired power fleet. Investment decisions depend on a clear understanding of where EPA is headed, and how the new regulations will affect generators’ costs—and market prices.

Unless embraced as an integral part of the business strategy, risk management is nothing more than a bureaucratic exercise that lulls the management and directors into a false sense of security.

A proposal to remove the bottlenecks on grid investment.

Investments in the U.S. transmission grid have been declining since the early 1970s.¹ Reasons include: 1) regulatory uncertainty; 2) onerous and multiple regulatory jurisdictions; 3) an extremely complex and time-consuming siting and permitting process; 4) uncertainty in the basic "who pays" vs. "who benefits" equation; and 5) shortcomings in the regional-planning processes.

Special Series (Part 1)

Energy Risk & Markets

Risk Appetites:

An effective risk-management strategy depends on knowing your shareholder's idea of value.

A pseudonymous executive tells why the CCRO's recommendations don't pass muster.

The latest splash from the Committee of Chief Risk Officers¹ (CCRO)-a new white paper regarding capital adequacy for energy companies²-makes barely a ripple. While an improvement over the CCRO's previous efforts,³ the capital adequacy recommendations do not provide adequate standards that can be implemented consistently by energy companies.

Frontlines

The Northeast Blackout goes political.

Nearly a year ago, cover story announced the rise of the chief risk officer (CRO). "Utility senior management is becoming positively enamored with the office of the CRO," we said. "Fully 40 percent of America's CROs work for utilities and energy companies."

"Back-to-basics" strategies challenge enterprise-risk philosophies.

 

Nearly a year ago, cover story announced the rise of the chief risk officer (CRO). "Utility senior management is becoming positively enamored with the office of the CRO," we said. "Fully 40 percent of America's CROs work for utilities and energy companies."

Implementing new credit risk management standards and best practices may require an overhaul of current utility IT systems.

Information overload is a serious risk to the effectiveness of the credit management process, especially as it relates to developing IT systems to implement the recent credit risk standards developed by best practice group, the Committee of Chief Risk Officers (see the CCRO's Credit Risk Management Report, www.ccro.org [Nov. 19, 2002]).

Beware of a national energy crisis that eclipses California's.

It seems rather elementary in an economic downturn to say that generating capacity will easily match demand over the next few years, especially with all the new plants that have been built lately. But what happens to the supply picture when you factor in a possible economic upswing, with continued high natural gas prices, an illiquid wholesale market, and an aging transmission infrastructure?

Companies that were on a buying spree before 2001 are putting assets worth billions n the block

A casual observer might expect that the industry's economic condition would produce a cornucopia of cheap assets for acquisitive companies . Eventually it might, but so far, it generally has not.