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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: reaper who wrote (220668)2/12/2003 1:56:45 PM
From: yard_man  Read Replies (1) of 436258
 
regulated entities can't go out of business and their equity can't go to zero, either.

Merchants can go out of business -- which means cheap supply or capacity costs for "regulated" survivors.

The problem right now is two unknowns that are huge and can kill the share price on a case-by-case basis depending on the outcome

1) SMD -- Fercs new world order for regulation -- owners of transmission would no longer control it and they really wouldn't even control the commit and dispatch of their units to a large extent, but would have to "bid them in" to something resembling a PX -- all of it won't get done and it is being slowed down -- but something is gonna happen and it is hard to predict what at this pt. Some who have derived a great deal of value from transmission assets may be farked over

2) New Source Review -- this environmental reg -- essentially says that any upgrade to an existing power plant makes the whole plant "new" for the sake of environmental regulations -- it's largely being pursued through the courts -- really a form of extortion -- a number of prominent utilities have already settled. Apparently they regard the risk of actually litigating the thing as too high. You probably heard a story a couple of months ago about Bush trying to rewrite the "implementation" of these rules -- hard to imagine him being able to do it -- and even at that he was simply nibbling around the edges. His environmental proposals -- if enacted would add another 50% to our rate base by 2015 -- most in place by 2010.

Only way to buy them would be to get a basket of regulated utilities.

Merchants or energy marketers are toast. A little bit o natural gas volatility may prolong the death throes a bit.

On the larger issue of prices for energy -- gotta look at fuel -- depends on how much of the time that gas-fired generation is on the margin in any given region.

I've come around to the POV that NG is going considerably higher next winter if not sooner.

Even supposing peak loads (primarily driven by the residential and commercial customers) don't grow in a the next couple of years -- I don't think the term glut applies at all. Tons of generation has been cancelled since last summer -- this was scheduled for two and three years out mostly.

Even if you want to call bigger reserve margins a glut -- more capacity than you need doesn't affect prices all that much -- you don't discount the energy produced because you've taken a loss on the capital. If it ain't in the money, it simply doesn't run, i.e. no such thing as an energy glut when talking about electric utilities -- only low or high prices.

Capacity glut would just affect the price of an asset, when it is sold or the output capacity is contracted for -- not the energy.
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