Frontlines

The Year of Living Dangerously

Energy companies' best-laid plans in 2001 were put on hold, after circumstance and fate stepped in.

The year 2001 will not be remembered as a very good year in our industry. Energy chieftains who had positioned their companies to reap the rewards of merchant generation, energy trading, global power privatization, US energy restructuring and a stock market environment that had rewarded the bold risk-takers in the beginning of the year, found by the end of the year that the risks were not being outweighed by the rewards.

In fact, every significant utility and energy company strategy suffered some sort of setback. Those pursuing a retail competition strategy watched as the California Crisis precipitated a decline in interest by states in retail competition. Also, after the California Crisis, merchant generators were no longer estimated to reap the same windfall profits, and distributed generation companies no longer had rolling blackouts to point to as a reason to buy their product. In fact, the decline in the economy, combined with continuous merchant plant development, had Wall Street investors devalue the merchant sector's earnings estimates in September. It seems that fortune did not reward the risk takers, but the conservative, stable players, which kept their non-regulated businesses under the same umbrella with their regulated businesses.