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Risk Appetites: How Hungry Are Utility Investors?

An effective risk-management strategy depends on knowing your shareholder’s idea of value.

How do shareholder relations link to risk-management policy? The answer: Utilities have to communicate to shareholders a particular set of operating strategies that will attain certain financial results. Risky activities both enhance and threaten those financial results. Therefore, policies must define how risky strategies are formulated, approved, controlled, and measured.
Byline: 

David C. Shimko

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Roundtable: The Future Of Generation

Meeting tomorrow’s power needs will pose tough choices.

A group of executives and analysts tell Fortnightly that the outlook for generation is positive, because it has to be. But making generation work well—affordably, cleanly, and reliably—won’t be easy.
Byline: 

Michael T. Burr

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An Expensive Experiment? RTO Dollars and Sense

Financial data raises doubts about whether deregulation benefits outweigh costs.

This year, U.S. electricity consumers will spend more than $1 billion financing the operation of six RTOs. RTO costs have nearly doubled since 2001. Restructuring the energy industry was more costly and more risky than anticipated, and reasonable estimates of RTO costs outweigh nearly all of the benefits anticipated.
Byline: 

Margot Lutzenhiser

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Cross-Subsidies: Getting the Signals Right

Should regulators care about the inefficiencies?

Utilities were founded to create cross-subsidies, but regulators need to address lingering uncertainties about such subsidies in a coherent, constructive way. The authors offer five recommendations.
Byline: 

Sean Casten & Joshua Meyer

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Model Risk Management: How to Avoid an Earnings Surprise

The industry is going down the mark-to-market route, creating significant opportunities for earnings swings and distortions.

Domestic and international groups have pushed the industry toward mark-to-market accounting, creating significant opportunities for earnings swings and distortions and making good model risk management more essential now than ever before.
Byline: 

John Bampfylde and David Shimko

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The New, New Thing?

At a posh dinner event and conference, industry experts speculate on the issues that could affect the industry in 2005.

It was the most exclusive, and one might say, one of the most extraordinary dinners. Never have I seen so many prominent CEOs, regulators, and financial gurus all in one room, discussing the future of the electric industry.
Byline: 

Richard Stavros

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People (December 2004)

Lawrence E. De Simone joined Northeast Utilities as president of subsidiary Northeast Utilities Enterprises Inc. Kent McCargar, vice president and CFO at DTE Energy Services, was named president of the company. Gary Stephenson has joined DPL Inc. as vice president, commercial operations. And others...
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Letters to the Editor (December 2004)

While we are concerned about the effects of ratings linkage on regulated utilities, in no respect do we blame credit rating agencies. In fact, we strongly believe that the rating agencies are critical gatekeepers that point out for investors and regulators the potential linkages among holding company subsidiaries that could result in utility abuse or its credit downgrade.
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A Better Measure for Profitability

A new way to measure what matters most: how close a unit comes to meeting its total potential profit.

Approximately 65 percent of capacity additions in the last few years have been gas-fired, combined-cycle units. Recent market conditions have been hard on these new resources, which have suffered from significantly low capacity factors. A better metric would measure a unit's ability to capture peak prices while minimizing shoulder period and off-peak losses. Furthermore, it would measure the extent to which a unit dispatches according to favorable market conditions.
Byline: 

Tom Ottem and Michael McNair

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Barriers to Entry: The Fight Against Power- Line Communications

And for a reasonable regulatory policy for new broadband technology.

To achieve the benefits of broadband over power line communications platforms, policy-makers must resolve a number of issues, including: (1) harmful radio interference; (2) access; and (3) cross-subsidies. If their policies impose diseconomies on the operation, design, or financial structure of BPL, widespread deployment of the technology is unlikely.
Byline: 

Charles A. Zielinski

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