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.

The Cost of Katrina

Debate continues on how to safeguard America's energy infrastructure.

In the wake of Hurricane Katrina, the central question: Could any of this have been avoided? Many experts believe that the new authority given to FERC to enforce mandatory reliability standards, as per the Energy Policy Act of 2005, will bring greater transparency to the process of protecting critical infrastructure.

A National Gasification Strategy

Presenting a program to stimulate robust coal-gasification technology deployment at low federal cost.

Federal loan guarantees and other incentives can clear the hurdles to near-term deployment of gasification technologies.

Spot-Market Clearing

Solving the electricity credit malaise.

A monthly billing cycle results in exposures of up to 60 days’ settlement. Participant default is likely, and the potential loss from such an event is significant. Spot-market clearing can solve these problems.

Business & Money

Sticking to the Knitting:

Business & Money

Sticking to the Knitting:

A review of three years of post-Enron stock performance by electric utilities.

Immediately following the Enron collapse, investors dumped the stock of any electric power company that appeared to be pursuing non-traditional growth strategies. Any company that emphasized unregulated businesses-investments in overseas assets, merchant power plant development, and energy marketing and trading-was suspect.

Risk Appetites: How Hungry Are Utility Investors?

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

How do shareholder relations link to risk-management policy? The answer: Utilities have to communicate to shareholders a particular set of operating strategies that will attain certain financial results. Risky activities both enhance and threaten those financial results. Therefore, policies must define how risky strategies are formulated, approved, controlled, and measured.

Changing Capital Structures for Changing Times

The utilities industry is in need of more equity.

Value Line projects that total capital for electric utilities will increase about 12 percent during the next several years, while common equity will increase nearly 28 percent. Similarly, natural gas distribution company total capital is projected to increase about 10 percent, and common equity close to 15 percent. For both industries, the median common equity ratio in the near-term future for companies with investment-grade rated subsidiaries is in the range of 51 to 52 percent. For utilities, higher equity ratios are desirable for several reasons.

Return on Equity: A Survey of Recent Rate Cases From State PUCs

Ratemaking Special Report

(November 2004) Fixing an appropriate rate of return on equity (ROE) for electric utility investors marks a fundamental component of the typical cost-of-service rate case conducted across the nation by state public utility commissions (PUCs). The following survey demonstrates the results of such cases, as observed over the past year.

Commission Watch

FERC Versus Bankruptcy Jurisdiction:

Commission Watch

FERC Versus Bankruptcy Jurisdiction:

Two recent articles in the 1 discussed conflicts that have emerged in the last 18 months over the respective jurisdictions of bankruptcy courts under the Bankruptcy Code2 and the Federal Energy Regulatory Commission (FERC) under the Federal Power Act.3 This occurs when a debtor seeks the bankruptcy court's approval under Section 365(a) of the code4 to reject a wholesale electricity sales contract that is a FERC-jurisdictional rate.