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Fortnightly Magazine - July 2006

Transforming Production Tax Credits

Three reasons to make them a permanent part of U.S. energy policy.

For the past decade, the renewable energy industry and various branches of the federal government have engaged in an ungainly, enormously unproductive two-step on production tax credits (PTC) for renewable energy projects, and for wind projects in particular. The PTC can be transformed into a keystone of an effective energy environmental policy. However, to achieve this transformation, the misperceptions must be challenged.

Byline: 

George Sterzinger

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The Institutional Investor: Still Hot on Utility Stocks?

Michael R. Yogg, who manages Putnam's Global Utilities Fund, explains what investors want from the sector.

Is the love affair with utility stocks cooling? A Standard and Poor’s equity research report in late May included a negative outlook for electric utilities: “We think the sector will underperform in 2006, weakened by the rising interest-rate environment,” the report said. But not all investors agree. We talked with veteran portfolio manager Michael R. Yogg of Putnam Investments, who revealed how the modern-day investor views the utilities sector.

Byline: 

Richard Stavros

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Are They Betting The Company?

Eleven questions to ask senior managers about their risk-management objectives.

It is almost impossible to design an effective hedge program without first determining the exact objectives a company wants to achieve. Although this sounds obvious, it rarely is. Management usually can agree that the firm should hedge to reduce risk, but “risk” is too vague a term to justify hedging on its own.

Byline: 

Brett Friedman and Tim Essaye

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Calling EPACT's Bluff

How Congress opened another can of worms with its call for regional joint boards to study power-plant dispatch.

Did Congress really invite the industry to re-examine the concept of economic dispatch, as practiced by the regional grid operators and RTOs, through market bids, day-ahead markets, a centralized auction, and a uniform market-clearing price? Perhaps not, but skeptics of RTO practice have called the bluff, if that’s what it was.

Byline: 

Bruce W. Radford

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Baby Boom Blues

A series of articles, reviews, and strategies for the anticipated utility workforce shortage.

Almost 40 percent of utility workers will become eligible for retirement in the next five years. Assuming only nominal growth, the industry by 2010 will need to hire 10,000 new skilled workers each year. Exacerbating this situation is a host of social and market factors that constrain the supply of skilled workers and make the workforce gap especially challenging for electric and gas utilities.

Byline: 

Michael T. Burr

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HR Roundtable: Bridging the Talent Gap

Recruiters and HR consultants see utilities taking an increasingly comprehensive approach to addressing tomorrow’s personnel challenges.

New talent is scarce. And keeping the old talent takes imagination. How are utilities handling changes in personnel markets? We speak with several leading HR consultants to get their views.

Byline: 

Michael T. Burr

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Defining the New Policy Conflicts

Failing to address and adapt to the new ratemaking realities could result in increased costs for the economy.

The approaching 100th anniversary of regulation by public utility commissions in the United States calls for some reflection. How much have things changed, and how much have they stayed the same?

Byline: 

Mark A. Jamison and Paul Sotkiewicz

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A Brief History of Rate Base: Necessary Foundation or Regulatory Misfit?

Regulators today must define earnings for energy retailers virtually bereft of fixed assets.

Applying the traditional rate-base concept to the new hybrid companies is where the gap between the old and the new regulatory paradigms resembles a deep schism. The current shifts in regulation should cause regulators to revisit and reconsider concepts that once reigned supreme in ratemaking.

Byline: 

Charles J. Cicchetti and Colin M. Long

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Watching and Waiting: A Blueprint for Transformer Maintenance

How online monitoring can prevent costly failures.

The march of technology, the urgent call for greater grid investment, and a painful recent past have caught up with the utilities industry. One key area of preventative maintenance for utilities is the transformer, many of which are decades old. Representing approximately $200 billion in investment, these units—which currently number approximately 100,000—can’t be replaced overnight.

Byline: 

Christian Hamaker

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Diamonds in the Rough

Retaining mid-career personnel will be important to a utility’s success.

With upward of 50 percent of the utility industry’s workforce approaching retirement, the industry’s leadership, at all levels, must come to grips with this enormous challenge. This looming demographic challenge is not simply a human-resources problem. For most of the industry, it poses a very real threat to the bottom line and touches upon the fundamental ability of the company to pursue its mission. The path to survival will require non-traditional thinking around all the people levers—staffing, work planning, compensation, work processes, performance management, development, job and organization design, and, most important, leadership.

Byline: 

Michael Brown and Sasha Lazor

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