Fortnightly Magazine - October 2006

The Trouble with Risk Measures

Companies should adopt a far more robust metric.

Market risk remains one of the most significant issues for gas and power merchants. The SEC requires disclosure of market risks in a company’s annual filings. However, the allowable metrics fail to communicate the type of information an investor actually can use to gain an understanding of the market risk embedded in a company’s business.

The Nation's Grid Chiefs: On The Future of Markets

Exclusive interviews with the CEOs of five regional transmission systems.

Exclusive interviews with CEOs at five regional independent transmission system operators: Phil Harris, at PJM; Gordon van Welie, at ISO New England; Yakout Monsour, at the California ISO; Graham Edwards, at MISO; and Mark Lynch, at the New York ISO.

A Capital Problem: Financing the Next Big Build

As rate disallowances become more commonplace and capital requirements expand, infrastructure development will come with a higher price tag.

As the industry’s regulatory risks and capital requirements expand, financing will come with a higher price tag—and another cost pressure in the ratemaking process.

M&A Value Creation: Combating the "Winner's Curse"

Significant value waits to be unlocked through consolidation, but conventional approaches have been inadequate.

Can consolidation create sustainable long-term value, or will it prove seductive but, ultimately, disappointing to shareholders, employees, customers, and management alike?

Stay Online With Partial Discharge Testing

How to maintain continuous power supply while measuring for weak spots.

Failures in medium-voltage power cables and their components cause a large proportion of annual power service interruptions, especially in high-density urban areas. Locating and repairing weak areas in cables at an early stage can improve the reliability of the energy supply considerably. Partial discharge testing is a proven condition assessment/test methodology.

Betting Against the Gods

In search of the Holy Grail of utility risk management.

The search is on for the Holy Grail of risk management. Utilities are managing new risks, as more sophisticated systems and services become available.

Risk Management Starts at the Top

How to sort out strategies and weather the storm.

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.

Letters to the Editor

Robert Garvin, MAJ, TC, 3RD Corps Support Command: Serving here and seeing how poor the people of Iraq are after 30 years of a dictatorship is truly life changing. You would not believe the electricity challenges they face here. In a country of over 25 million people, Iraq has only about 5,000 MW of electricity at any given time.

Daniel Simon decided to investigate how much the extra heat of incandescent light bulbs over CFLs might cost a customer in air-conditioning cooling costs, compared to an analysis in “Squeezing BTUs From Light Bulbs.”

A National Meltdown

Discordant global-warming solutions may end up burning utilities.

How will utilities in the next 10 years manage a multi-billion-dollar infrastructure buildout, higher interest rates/cost of capital, diminishing free cash flows, state renewable mandates, and political pressures to keep rates or power prices low, all while complying with carbon emissions programs that emphasize higher-cost fuels? Meeting the challenges may depend on whether a national carbon program that regulates carbon emissions is established.

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