Frontlines

T+D Out, G+D In

Why not keep the power plants and sell off transmission instead?

U.S. utilities made a big mistake in selling off their power plants. They should have held those plants and sold off their transmission lines instead. That's what Ed Tirello says, the financial analyst now at Deutsche Bank Securities Inc., who made his mark about a decade ago with his famous quip of "50 in Five"-that mergers would bring the number of U.S. utilities down to about 50 companies within five years. He was right, back then, but a little off on his timing.

Tirello adds that state regulators at the public utility commissions perhaps should share part of the blame. After all, in many cases it was the PUCs that forced utilities to divest their generation assets-or at least their fossil-fired plants. They wanted to establish a fair price for the plants to help gauge the extent of stranded costs.

The PUCs also wanted to deflate market power. Divesting generation would segregate the production process from the monopoly wires highway that transports the product.