How the filed-rate policy wreaks havoc- and what courts can do about it.
Like many venerable legal rules, the filed-rate doctrine is rarely questioned. Over the last century, it has served many important purposes. However, with deregulated wholesale electric power markets at the federal level and various degrees of deregulation across the states, both the doctrine's continued applicability and usefulness are suspect.
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.
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.
For The 21st Century
So it begins again. After several financially tumultuous years, executives at many of the nation's top utilities can once again look to the horizon and ask the growth question worthy of a Caesar: "What worlds to conquer?"
Utility executives are emboldened by bulging free cash flows, improved credit quality, lower operations and maintenance costs, favorable regulatory treatment, growing service territories, and increasing demand for power.
Business & Money
Credit-rating linkage harms certain power companies. Ring-fencing is the best answer for regulators.
In recent years, a persistent battle has developed between state public utility commissions (PUCs) and holding companies over the negative financial and operational impacts on regulated utilities of failed diversification investments. Ratepayers expect to compensate companies for the costs of providing utility service-not those costs associated with the unregulated activities of affiliated companies.
Board coordination is the key.
Many utility CEOs are happy to pass off risk-management policy to the CFO and the head of the trading desk. After all, with deregulation and re-regulation, collapsing spark spreads, hypersensitive rating agencies, and nervous investors, there is enough to worry about. So what's the problem? If the financial guys control and report the risks and profits and losses (P&L) within risk tolerances, why should the CEO be concerned about risk management?
For Public Utilities Fortnightly's 75th Anniversary CEO issue, the magazine looked to the horizon and asked these new captains about the planned course for their companies, and for an entire industry.
Business & Money
A spate of proposed U.S. tax rule changes soon may open a window of opportunity for certain utilities.
In the mid-1990s, before the rise of the Internet and the fall of Enron changed the calculus of business investing and the regulatory landscape, the historically staid U.S. utility industry began to be viewed as a "growth play." This triggered a global buying spree that led U.S. companies to invest tens of billions of dollars in electricity generation and distribution businesses all over the world.
The commission's power grab over bankruptcy courts condemns merchants to a corporate netherworld.
Since we last visited the conflict between the Federal Energy Regulatory Commission (FERC) and bankruptcy courts over who decides whether a debtor can terminate unprofitable power contracts,1 a new district court decision out of Texas has come down tilting the field in favor of FERC's assertion of exclusive authority.
A renewed capital investment structure is required for long-term investment in power infrastructure.
The bank markets and the long-term fixed income markets, or institutional investors, have long memories, and their pain is still fresh. Over the last few years, they have had to watch their investments in power infrastructure become distressed, bankrupted, or reorganized.