Fortnightly Magazine - November 1 1999

Did Power Plant Buyers Pay Too Much?

A line-by-line case study of two high-priced portfolios, comparing fixed, variable and capital costs against forecasts of regional market prices.

A multi-billion-dollar wave of utility divestiture and power plant auctions has taken place during the last 18 months. Table 1 details some of these transactions, including the purchase price on a dollar-per-kilowatt basis and as a multiple of net book value. These measures frequently are cited as indications that buyers paid too much.


Illinois regulator Ruth Kretschmer takes a stand against deals that would rub out competitors.

I can't recall seeing a more cogent, convincing andpassionate plea for utility regulators to get off their backsides and actually take a stand on something, as when just the other day, I came across the dissenting opinion issued Sept. 23 by Ruth Kretschmer, of the Illinois Commerce Commission. There she takes her own agency to task for voting (3-2) to approve the proposed mega-merger between the telephone giant SBC Communications Inc.

News Analysis

But who gets a slice of the pie?

In August the Bonneville Power Administration released its proposed wholesale electric rates for the five-year period from 2002 to 2006. The controversial proposal is subject to five months of scrutiny, including eight public hearings from Sept. 30 through Oct. 14, with adoption of final rates expected early in 2000.

In this era of emerging competitive markets, relatively low-priced federal power is prized by wholesale customers in the BPA's Northwestern U.S. service territory.