When will utilities see the next round of deals?
With the substantial decline in utility mergers and acquisitions (M&A) activity since the heady days of 2000, it's time to ask when M&A activity might return, if at all. Business combinations provide a potentially important means for a utility to enhance its earning and growth prospects, and one of the few alternatives available to achieve these objectives at an acceptable risk.
The Future of Fuel Diversity
The fragmented electric industry structure poses an obstacle to a more stable, diverse, and secure power supply.
Daily news headlines have drawn attention to concerns about fuels, especially the rising prices of oil and natural gas. Fears of interruptions of oil exports from Iraq, Iran, Russia, and Venezuela (take your pick) roil the energy market. But coal is not exempt from bad news, as production declines reduce output from Eastern U.S.
Higher payouts aren't enough over the long term.
The past two years witnessed the ascendancy of dividend yield in the valuations of U.S. electric utilities. The recent primacy of yield in utility-industry valuations is the product of a unique confluence of factors. The collapse of most of the industry's non-regulated growth initiatives has resulted in a market that attributes little value to the industry's growth prospects beyond that which has been historically generated by the expansion of rate base-1 to 3 percent.
A holistic, new approach to cost/benefit analysis.
The still-fresh memories of last year's Northeast blackout coupled with rising congestion nationwide have increased awareness of the electric transmission investment shortfall in the United States. Such investment, in the right locations, would have a highly positive benefit-cost ratio. But how much should be spent?
Operations & Maintenance
The process of calculating meaningful benchmarks is fraught with pitfalls.
Regulatory reporting requirements for major U.S. utilities provide a wealth of data for benchmarking studies. Both the Federal Energy Regulatory Commission (FERC) Form 1 for electric utilities and FERC Form 2 for gas utilities involve the reporting of more than 2,500 unique data points per utility per year, across diverse aspects of utility operations, maintenance, and finance.
Frontlines
Will a back-to-basics strategy meet investor expectations?
It's an issue that is coming to the fore with greater force-the debate over how utilities should honor their obligation to stockholders. But this time there seems to be quite a difference of opinion over strategy-or so we found in our annual finance issue.
People
New Opportunities:
Peabody Energy named Charles "Chuck" Burggraf group executive of Colorado operations, responsible for Twentymile Coal Co.'s Twentymile Mine near Oak Creek and development of additional coal reserves in Colorado. Burggraf most recently served as operations manager of the Twentymile Mine.
Wisconsin Public Service promoted Charlie Schrock and Larry Borgard. Schrock is now president and COO of operations; Borgard becomes president and COO of energy delivery.
Power Measurement
Failing the Market-Power Test:
How FERC's ruling could affect wholesale power markets.
Perspective
Hard-and-fast ring-fencing rules are not the best way to maintain order in the partially deregulated utility sector.
In 1992, my colleagues on the Michigan Public Service Commission (MPSC) and I initiated the first retail wheeling case in the country. Retail wheeling was the old name for competition, back when everyone thought that moving electrons from one place to another was a relatively simple task, one that could not in any way harbor underlying sinister acts or motives.
Commission Watch
The AGs' Global Warming Suits:
A recent lawsuit filed by eight state attorneys general will take the industry to the place where bad policy meets with bad economics.
