Fortnightly Magazine - October 2005

The Energy Policy Act of 2005: Two Views

What the legislation says about a national strategy.

Now that the Energy Policy Act of 2005 has had a chance to sink in, a review of the bill's perks and pork is in order. Supporters of the 1,724-page piece of legislation laud it as a triumph of job-creating bipartisanship that attempts to shore up our energy supply, while detractors call it a gargantuan giveaway to a well-heeled industry.

A Welcome Truce in the Electricity Wars

Let's enjoy this brief period of diminished acrimony before implementation of this landmark law.

In a time of record high gasoline prices, war, and increasingly shared global climate concerns, it is lamentable that the Energy Policy Act of 2005 does so little to address these critical issues. Within the narrower context of policies primarily affecting the electric power industry, however, this is a much more significant piece of legislation, and it includes a few accomplishments bordering on the extraordinary.

A Low-Voltage Energy Bill

While a few provisions are worth embracing, most of its 1,724 pages represent a waste of good timber.

After four years of legislative trench warfare, contentious legal wrangling, and heated partisan rhetoric, President Bush finally got what he wanted—a really big energy bill. What he did not get, however, was an internally consistent "national energy strategy." Examination of the legislation reveals that its title—the Energy Policy Act of 2005—is less descriptive than the title popularized by Sen. John McCain: the No Lobbyist Left Behind Act of 2005.

Beyond Sarbanes-Oxley

Energy Trading & Risk Management: How to evaluate risk and improve decision-making capabilities.

With a heightened focus on risk management, it has become increasingly clear that traditional risk-management approaches do not adequately identify, evaluate and manage risk. An ERM approach integrates risk management with existing management processes, identifies future events that can have both positive and negative effects, and evaluates the effectiveness of strategies for managing the organization's exposure to those possible future events. ERM transforms risk management to a proactive, continuous, value-based, broadly focused, and process-driven activity.

By Executive Decision

Energy Trading & Risk Management: A better framework for making decisions is required to ensure earnings stability and shareholder value in the utilities industry.

Although utilities are refocusing attention on their traditional utility businesses, it is clear that the traditional utility decision-making framework is not sufficiently robust to meet the needs of today's utility executive. An effective executive decision framework provides better answers in the complex utility environment that exists today.

CFOs Speak Out: Making Convergence Work

Warren L. Robinson, Executive VP and CFO, MDU Resources

Warren L. Robinson, Executive VP and CFO, MDU Resources: "In the 1920s we discovered some oil and gas. ... In the mid-1980s, we really broke it out and started to develop oil and gas fields outside our region."

CFOs Speak Out: Utilities: Not Interested

Stephen I. Chazen, Senior Executive VP and CFO, Occidental Petroleum

Stephen I. Chazen, Senior Executive VP and CFO, Occidental Petroleum: "I think the skills of a utility management are different than the skills of an oil management… I don't think those are related industries. I don't think the skill of selling electricity to someone's house is really the same as the skill of an oil company."

CFOs Speak Out: Growing Overseas

John R. Biggar, Executive VP and CFO, PPL Corp.

John R. Biggar, Executive VP and CFO, PPL Corp.: "We are satisfied with the level of investment in international properties, which are essentially all electricity distribution businesses."

CFOs Speak Out: Enter the Mega Utility

Geoffrey S. Chatas, Executive VP and CFO, Progress Energy

Geoffrey S. Chatas, Executive VP and CFO, Progress Energy: "[We are] focusing on running efficient utilities in growing states that have favorable regulatory environments so that you have the opportunity to earn that kind of 12 to 13 percent return on equity on the utility business."

CFOs Speak Out: Playing LNG for All It's Worth

Neal E. Schmale, Executive VP and CFO, Sempra Energy

Neal E. Schmale, Executive VP and CFO, Sempra Energy: "Make sure you manage the risk. ... We're very careful in that area. ... We're not building the LNG plants until we have the output contracted for."