Fortnightly Magazine - January 15 1999

As utility takeovers break new ground, the FERC ponders proposed rules, perhaps already out of date.

A year ago, when U.S. Antitrust Czar Joel Klein talked of a "window of opportunity" for electric utility mergers, he didn't predict when it would close.

And it hasn't yet.

In the 12 months leading up to January 1998, when Klein had addressed the Federal Energy Regulatory Commission through its "Distinguished Speakers" series, only the ill-timed Primergy deal had been turned down. The next year, 1998, would prove no different.

New Mexico's PUC goes down in flames.

This story has everything: politics, favoritism, a stock price crash, extortion (a long-ago crime by a certifiable nut), a utility rate case (I love'em), Ivy League economists (like moths to a flame), and finally, a last minute stay of execution, perhaps saving the utility from default on its revolving line of credit. Heck, even Enron's involved.

What's missing, however, is a clear understanding of who the good guys are.

During the past year, more than 35,000 megawatts of generating assets have been put to auction. Much analyst discussion has focused on the price and premium above book value these assets are commanding in the marketplace. An equally important issue is the new owners' plans for the assets. These plans provide significant insight on where generation markets are headed.

In nearly every sale, the new owners intend to add value to the plant by reducing operating costs.

Author Spratley argues that Fortnightly's title misrepresents his December article.

In Fortnightly's Dec. 1 issue, I was surprised to see you place a new title on my article about how states are leveraging system benefit charges to finance new photovoltaic (PV) projects (originally "Consumer Charges Power Solar Financing"). Your provocative title: "Solar Mandate? Like it or not, Consumers Pay" implies that consumers are bearing an enormous burden for solar power imposed by state policymakers.