EURO-Energy?
Electric
Utility Comment, 11/27/2006
- Allegheny
- Energy East
- OGE Energy
- Pepco
- DPL
- Pinnacle West
- CH Energy Group
The British began to buy U.S. utilities several years ago with the
acquisition of Niagara Mohawk Power and Warren Buffett recently paid
$5.1 billion to acquire PacifiCorp—to re-Americanize, the Pacific
Northwest Company.
Last year Congress repealed the Public Utility Holding Company Act of
1923 (see our article in Public Utility Fortnightly, dated July 2005)
which, among many concessions, removed the restrictions on who could own
and run utilities in the United Sates. Did Congress ever anticipate that
Louisville Gas & Electric would become part of the E.ON family—a
German-based company acquiring a vast portfolio of utility companies
throughout the world? E.ON’s appetite shows little chance of abating. E.ON is
accumulating assets in Central Europe and Scandinavia: in April 2001, it
bought Powergen in the U.K. for $14 billion. E.ON’s acquisition spree
has only being slowed by “white-knights” in Europe, concerned over E.ON’s already vast holdings and concerns regarding future market
influence if not slowed. E.ON’s recently fought off Barcelona Gas
Natural SDG for major Spanish energy holding company Endesa—raising
its final offer to $47 billion (38%) from the initial $34 billion offer:
Do you think these guys play “to win?” Europe has found American power
companies very attractive investments and paying premiums in excess of
those deemed feasible by domestic companies.
While the intent of changing this particular provision of the law may
have been to encourage increased consolidation among U.S. utilities, it
appears as though at face value, this would be of little concern to the average consumer,
since the burden of proof on setting rates on rates-of-return sufficient
to attract capital Investors, on the other hand, are pleased by the
larger prices being paid for an industry which has seen more than its
share of volatility, but political leaders and consumers need to
question “sensibility” of handing over control of any portion of our
fragmented energy industry to foreign owners. Our dependence on foreign
countries for oil has influenced foreign policy in a manner which is not
necessarily in our long-term best interest and the fact that we cannot
provide adequate rates-of-return to domestic investors is not merely
disheartening but “questionable” over the long-haul.
As one does a post-mortem on the energy sector over the past ten years,
there is only one conclusion which comes to mind: “if it’s not broke,
don’t fix it.” Deregulation programs initiated a decade ago are still
threatening the financial viability of some companies; for example,
Illinois finally came to the realization that the elaborate deregulation
scheme and postponement of deferred costs will have to be recouped from
consumers—contrary to the promise made when lawmakers eagerly
ratified industry restructuring plans, thereby placing Commonwealth
Edison and Ameren in a precarious financial position, such that
Commonwealth Edison has alluded to the possibility of filing for
bankruptcy. Ameren’s rate increase request was reduced by nearly 60%.
The “transition” periods imposed in the initial years of the
deregulation plans of many States provided for a step to market prices at
a “given” point and a “reconciliation” of accruals at the Transition
date. Now “the piper must be paid”—and Illinois is reliving the flaws
inherent in the California deregulation plan (instituted in 1995), that
back-fired 2000-2001. It is impossible to believe that the United States
has the talent to transmit a photo over a nano-chip but manages to
properly devise a reliable, stable and viable energy industry—and with
every act by Congress and individual States, it seems we blissfully
continue to compromise our energy future. |
