The time has come to revisit where the accumulated provision for depreciation belongs. Utilities objected—some 50 years ago—when it was moved from the right side of the balance sheet to the left side, with good reason. Consistency, comparability, reliability and relevance all demand an end to this strange accounting practice.

By the end of last year, much was being made of the failed attempts at multibillion-dollar mergers by FPL with Constellation, Exelon with PSEG, and Southern Co. with Progress Energy. In spite of the repeal of the Public Utility Holding Company Act, these mega-mergers still required regulatory approvals from multiple state and federal agencies, and their high profiles attracted attention and resistance from a vast array of special interests.

How will utilities in the next 10 years manage a multi-billion-dollar infrastructure buildout, higher interest rates/cost of capital, diminishing free cash flows, state renewable mandates, and political pressures to keep rates or power prices low, all while complying with carbon emissions programs that emphasize higher-cost fuels? Meeting the challenges may depend on whether a national carbon program that regulates carbon emissions is established.

The recent breakout of the benchmark 10-Year Treasury yield from the recent mid-4 percent yield band to approximately 5 percent (with some market expectation that it may increase further) potentially has important strategic and value implications for the power and utility industry.

Contract termination should be easy. Consult the applicable master agreement, calculate the close-out amount, and send or receive a check. If only it were so. In this discussion, we investigate the guidance offered in the key electricity master agreements regarding the calculation of settlement amounts following an event of default and subsequent termination. We also illustrate what we perceive to be a "commercially reasonable" or "good faith" approach to determining settlement amounts.

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.

Business & Money

An analysis of the strategic implications of the re-basing of power and utility industry valuations.

Over the past several months, traditional valuation levels have re-emerged in the power and utility industry, with recent premium valuation metrics compressing significantly.

Commission Watch

Incentive regulation is not a cure-all for the continuing controversy over return on equity.

Regulated utilities are all too familiar with the contentious disputes that surround how the allowed return on equity (ROE) is set in a traditional cost-of-service setting. These disputes, which are reappearing as numerous utility rate-stabilization plans signed as part of deregulation come to an end, are likely to hinge, as always, on the riskiness of utility operating environments.

How joining the EU may transform the Central and Eastern European electricity sectors

It is not coincidental that energy assets are for sale across Central and Eastern Europe the same year that 10 new countries join the European Union (EU). New member states had to demonstrate significant sector reforms to qualify for EU membership. These sectors have historically had miserable economic results due to artificially maintained low prices, poor and often corrupt management, and significant political interference.