A look at issues that could keep energy executives up at night.
The most common strategic issue depriving utility executives of sleep is the looming clash of investor expectations for steady growth in earnings compared with what utilities can deliver given slow growth in customers and demand. While many dream of assured regulated rates of return, the reality for most utilities is that the 1.5 percent retail growth experienced between 2002 and 2003 will prove unsatisfactory for earnings.
Rural Distribution Territories: A Drag On Utility Earnings?
THE U.S. TREASURY DEPARTMENT HAS ISSUED RULES that will allow all public power systems to participate in independent system operators without risk of losing the tax-exempt status of their bonds.
Investor-owned utilities are not happy. According to the Edison Electric Institute, the regulations significantly expand the ability of large government-owned electric utilities to use federal subsidies to compete against private utilities.
Meanwhile, the American Public Power Association is pleased that the rules passed Jan.
Investor-owned utilities serving the Southeast U.S. are well-positioned to face increasing competition, but the region's municipal joint power agencies and electric co-ops may face serious losses.
That's the finding of a Moody's Investors Service regional study, the fourth in a series.
The "Southeast Electric Break-Even Analysis" estimates $24 billion in stranded costs for the region, with cooperatives and JPAs holding a disproportionately high portion of the per-kilowatt costs.
Investor-owned utilities in Pennsylvania have filed their retail electric competition plans with the Pennsylvania Public Utility Commission to comply with recent legislation requiring customer-choice pilots for 5 percent of the peak load of the state's electric utilities.
PECO Energy Co. has filed a proposed electric choice retail pilot program that would allow about 90,000 residential, commercial and industrial customers to choose their electric suppliers as soon as October and no later than January 1998.
a decommissioning trust suffers the same vulnerabilities.
The Maine Public Utilities Commission (PUC) has released for comment its Draft Plan on Electric Industry Restructuring, which would allow all retail customers to choose their generation supplier beginning in January 2000. The draft permits customers to aggregate, and does not require reciprocity based on retail access in other states or Canada.
Investor-owned utilities (IOUs) would have to structurally separate generation by January 2000, and divest all generation assets by January 2006.
I was amused by your "Headlines" item on the Reason Foundation's study calling for privatization of TVA and the power marketing administrations due to government subsidization and poor management (May 15, 1996, p. 16). If those were the two overriding issues, one could argue in favor of swapping segments and doing something different with the segment that costs the government the most.
RATE UNBUNDLING: ARE WE THERE YET?
FEBRUARY 15, 1996