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Interesting Times

Utilities stay the course in a volatile market.

A wave of mergers and acquisitions is moving through the industry, as utilities and financial players position for growth and strategic advantage. Will economic and regulatory forces continue supporting these transactions? Our annual finance special report examines trends in capital markets and M&A deals involving utilities, power generators and gas suppliers.

Twist and Sulk

A fearful economy cries for industry leadership.

Many utilities have trimmed their capital spending in the face of economic weakness and regulatory uncertainty. At the same time, strong energy sales have boosted cash flow and profits. Backed by regulated returns and clear resource plans, the industry should step up infrastructure investments. Are we ready to lead America out of economic malaise?

Cap-Ex Conundrum

Does slow and steady still win the race?

When a capital-intensive industry enters an asset-building cycle, many companies will operate in the red for a few years or more. That’s not necessarily a bad thing, as cap-ex investments represent growth for shareholders. The devil is in the details, however, and companies facing a large slug of environmental compliance investments might produce disappointing returns over the next few years.

The 40 Best Energy Companies

(September 2011) Our annual ranking tracks the publicly traded electric and gas companies that produce the greatest value for shareholders. Despite the year’s topsy-turvy financial markets, perennial performers like DPL, PPL and Exelon return to the top of the list. Others face looming cap-ex burdens as regulators impose new mandates and requirements. Leading companies are positioning for growth, despite a challenging landscape.

Updating the Utility Compact

New regulatory frameworks encourage electric infrastructure investment.

Under business-as-usual regulation, electric utilities must file more and more rate cases to keep up with rising costs. New approaches provide for modest but stable recovery of costs outside rate cases, while providing ongoing regulatory oversight and creating strong incentives for utilities to efficiently manage construction projects.

Vendor Neutral

(July 2011) Williams Partners L.P. expands Transco transmission lines; Google to provide fiber optic Internet service for Kansas City, Mo.; Constellation Energy picks Lynxspring Inc.; plus contracts and developments involving Servidyne, EnerNOC, Siemens Energy and others.

Capacity Roulette

Out of market means out of luck—even for self-supply.

When the U.S. Federal Energy Regulatory Commission issued its so-called ”MOPR“ decision in April 2011, approving a minimum offer price rule (or bid floor) for PJM RPM capacity market — and then on the very next day did much the same for New England’s FCM capacity market — FERC did more than just prop up prices. Instead, it created a nightmare scenario for utilities that still own their own generation. These utilities, who choose to “self-supply” with their own plants, rather than buy capacity from either the RPM or FCM, adequacy rules, could now be forced to pay twice for capacity — if their own plants are deemed inefficient or uneconomic.

Cali Gets it Right

Not your father’s feed-in tariff.

The industry has struggled to craft a feed-in-tariff (FiT) structure that works for solar generators and utility customers, with mixed success. But now, the California Public Utility Commission might have found an approach that other states can replicate. CPUC’s FiT mechanism recognizes the value proposition of solar energy, and uses market forces to drive economic improvements, especially for distributed solar projects.

Renewables at a Crossroads

Investment opportunities in an evolving environment.

Some of the key policy mechanisms and market factors that triggered the boom in renewable energy development have weakened in the face of one of the most severe economic downturns in modern history. In some ways, though, the renewables sector is richer and more dynamic today than when the boom began. A shakeout might be coming among renewable power players, and those that survive will strengthen their capabilities, hone their strategies, and take advantage of industry consolidation to build scale.

Killing the Electric Car ... Again!

Perverse policy signals are pitting utilities against the EV revolution. Will regulators give utilities the incentives they need to pave the way for electric transportation?

The recent rise in oil prices once again stokes the interest in electric vehicles (EV) – and for good reason. They run cheaper, cleaner and on domestic fuel. Some EVs already have a lower total cost of ownership than a gasoline-powered vehicle, and others will follow as production scales up and unit pricing drops. Unfortunately, in the current regulatory environment, EV adoption in the U.S.