Electric Light & Power - September,October 2009 (Malestrom)

8/10/2019 Electric Light & Power - September,October 2009 (Malestrom)

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Sep|Oct|2009

volume 87|05

www.elp.com

Climate PolicyRisk Management

Is Carbon Recyclinga Viable Alternative?

Energy Storagefor System Regulation

Big Solar,Small Footprint

Signs of Weakness2008 Utility Financial Rankings

Click here

to access

SpringEnergy 2009

Catalogue
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Answers for energy.

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Smart Distribution Solutions

www.selinc.com

[email protected]

+1.509.332.1890

The distribution solutions you use today from SEL

protection, communications,

sensing, monitoring, security, and controlall make your grid smarter. These smart

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Automatically detect and isolate faults, restore power,

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Schweitzer Engineering Laboratories invented the

worlds first digital distance relay 25 years ago,

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The business of power for utility executives

Sep|Oct|2009

volume 87|05

4 | ELECTRICLIGHT&POWER Sep|Oct|2009

Events 6

Commentary/Letter to the Editor 8

COLUMNS EE: Priniciples and Practice 12 How Low Can We Go? Driving

to Zero Net Energy Buildings

by Penni McLean-Conner, NSTAR

Benefit of Counsel 14Long-term PPAs

by Andrew Schifrin and Larry Eisenstat, Dickstein Shapiro LLP

Economic Inquiry 16Multipurpose Megawatts:

How Markets Define New Values

by Tanya Bodell, CRA International Inc.

Taking It Into Account 18 Misguided Market Design

or Market Manipulation?

by Dan Watikiss, Bracewell & Guiliani

FEATURESIndustry Report 20

The 2008 Utility Financial Rankings

Showing Signs of Weakness

by Teresa Hansen, editor in chief

SECTIONSFinance

Utility Financial Performance: 28

Warning Signs Ahead

by Brad Kitchens and Greg Litra,

ScottMadden Inc.

Pursuing Government Grants 32

by Michael A. Casey Herman and Phil Koos,

PricewaterhouseCoopers

GenerationClimate Policy Risk Management 36

in the Electricity Industry

by Richard Sandor and Michael Walsh,

Chicago Climate Exchange

38 Carbon Recycling: An Alternative

to Carbon Capture and Storage

by Rowan Oloman, contributing author

40 Econamine FG PlusSM

CO2-Capture Technology

by Dennis W. Johnson; Satish Reddy,

Ph.D.; Donald E. Broeils; and James

H. Brown, PE, PMP, Fluor Corp.

Renewables42 Solar Rising

by Robert Rogan, eSolar

46 Concentrating Solar Thermal

Energy and its Uses

by Roger Molina, PE, The M8Group

48 Big Solar, Small Footprint: The Role

Innovative Technologies

Play in our Energy Future

by Nancy Hartsoch, Solfocus Inc.

Energy Management52

Energy Storage for System Regulation:Why its Becoming Important

by Nancy Hartsoch, Solfocus Inc.

54 Outage Management

and Customer Relationships

by Guerry Waters, Oracle Utilities

IT/CIS & CRM56 Retrieve That Data ... and Make IT Snappy!

by Kristen Wright, associate editor

58 The Smart Way to Protect the Grid

From Cybersecurity Threatby David Owens, Edison Electric Institute

59 Planning for Another Challenging Year

by Jerry Duvall, CS Week

T&D60 Investment in New Transmission Projects

Remains Strong

by Thomas F. Garrity, Siemens

The Uncomfort Zone66

Bleed it OutBy Robert Evans Wilson Jr.

12

48

60

66

Cover photo: Copyright Jose Marafona


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We need partners that

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E V E N T S

ELECTRICLIGHT&POWERis the official supporting publication of

March 23-25, 2010 : Tampa (Fla.) Convention Center

ELECTRICLIGHT&POWER is the official print publication of

May 2428, 2010 : Nashville, Tenn.

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Associate/Online Editor

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Presentation Editor

Clark Bell(918) 832-9258 : [email protected]

Audience Development ManagerJanet Orton

(918) 831-9191 : [email protected]

Southeast & Midwest Regional Sales Manager

Tom Leibrandt(918) 831-9184 : [email protected]

Exhibitor Service Manager DistribuTECH

Teresa Davis(918) 832-9281 : [email protected]

Northeast Regional Sales Manager

Kathleen Wackowski(603) 891-9129 : [email protected]

Ad Trafc

Daniel Greene(918) 831-9401: [email protected]

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President/CEORobert F. Biolchini

ChairmanFrank T. Lauinger

Senior Vice President, Planning, Development& Strategic Policy Advancement

Jayne A. Gilsinger

Editor in Chief

Teresa Hansen(918) 831-9504 : [email protected]

Senior Editor

Kathleen Davis(918) 832-9269 : [email protected]

Associate Editor

Kristen Wright(918) 831-9177 : [email protected]

OCTOBER

Oct. 19-21

The Business of Plugging

In: A Plug-In Electric

Vehicle Conference

Center for Automotive Research

http://pev2009.com

Oct. 21-22

Entelec Fall Seminar Series

Entelec

Denver

http://entelec.org

Oct. 21-22

Rate Case Cost Recovery:

Addressing Energy Efficiency,

Demand Response,

Renewable Energy, and

Smart Grid Investments

EUCI

Los Angeles

http://euci.com/

conferences/1009-rate-case

Oct. 26-28

Corporate Energy

Management Summit

IQPC

Chicago

http://corporateenergysummit.

com

Oct. 26-29

Air Quality VII: An International

Conference on Carbon

Management, Mercury,

Trace Elements, SOX, NO

X,

and Particulate Matter

Energy & Environmental

Research Center

Arlington, Va.

http://undeerc.org/AQ7

NOVEMBER

Nov. 9-10

Generation Summit VI Fall 2009

EUCI

Atlanta

http://euci.com/

conferences/1109-ccs/

agenda/php?ci=824

Standard Mail A Enclosed - P3

The business of power for utility executives

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BUILDING A WORLD OF DIFFERENCE

No matter what your personal beliefs are, or what your corporate

position is, climate change is an issue that has to be addressed.Enterprise Management Solutions (EMS), the management

consulting division of Black & Veatch, can help you determine

what you can do todayto manage demand, identify risk and

exposure, and deal with challenges from sustainability and energy

assurance to water scarcity. Our Climate Change Pathfinder

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Commentary

Teresa Hansen, editor in chief

Smart Grid Success Will Require Customer Cooperation

In a few weeks, the U.S. Department of Energy (DOE) will announcewhich utilities will receive the first round of stimulus funding made available by the American Re-

covery and Reinvestment Act, commonly called the stimulus plan. It will make available $4.5 billion

for smart grid projects that, according to Energy Secretary Steven Chu, will be a down payment on

our nations clean energy economy. The moneys No. 1 purpose is to preserve and create jobs, but

Chu and other industry experts have said the funding will jump-start needed modernization of the nations electricity

grid, helping the United States reach DOE goals of a clean energy economy.

Since the stimulus funding was created and announced in February, utilities have been feverishly working with

vendors and consultants to complete the stimulus applications and raise the matching funds required of companies

that are awarded stimulus funds. By the Aug. 6 deadline for the first round of funding applications, more than 45utility companies had applied for about $4 billion. Much of the money is planned for smart metering or advanced

metering infrastructure (AMI) projects aimed at enabling customers to better manage their energy use.

Once implemented, these AMI projects are expected to result in a substantial reduction in peak electricity

demand. Reduced demand should reduce the need to build more generation, resulting in a reduction in the countrys

greenhouse gas emissions and the impacts of global warming.

In addition to the work associated with completing the applications, utilities, vendors, government agencies and

other stakeholders have been working with the U.S. Commerce Departments (DOCs) National Institute of Stan-

dards and Technologies (NIST) to develop smart grid standards. They have made significant progress. Six months

after beginning the standards development process, the DOC released in September a draft report, NIST Framework

and Roadmap for Smart Grid Interoperability Standards, which identifies about 80 initial standards. Work on stan-

dards is continuing.

Much work also is being done to assure that a smart grid will be secure from cyberattacks. And, utilities andlawmakers are discussing new policies and regulations that will allow utilities to realign their business models to

achieve the smart grid goals and still create revenue for stockholders.

One critical area, however, that might not be getting the attention it needs is convincing utilities customers to

embrace the programs that will be made available with a smart grid. As I mentioned, much of the stimulus money re-

quested is planned for AMI projects. If these projects are approved for stimulus funding, millions of residential smart

meters will be installed, and with these installations will come numerous energy efficiency and demand response

programs for utility customers. At least initially, most of these programs will require customer buy-in and behavior

changes. To cut peak demand to the degree it will be needed, utilities must create and customers must participate in

new programs. Gaining customer participation will not be easy. Someone who works in the customer service area

of a large investor-owned utility told me recently that her company is having little success persuading customers to

enroll in electronic bill payment. She said that less than 5 percent of the utilitys residential customers pay their bills

electronically. Compare that with the credit card industry in which more than half of all credit card bills are paid elec-

tronically, and eight out of 10 credit card holders said being able to view their bills online was important to them. The

credit card industry has had much more success connecting with its customers. If utilities cant convince customers

to try electronic billing, will they be successful at convincing them to change their behavior?

The smart grids success at lowering electricity demand depends on customer behavior. If residential cus-

tomers do not respond to utilities programs aimed at reducing electricity usage, a lot of money is going to be

wasted.

Improving the power grids efficiency and reducing the need for more generating makes much more sense eco-

nomically and environmentally than building new power plants. A few hurdles must be cleared, and customer partici-

pation is probably the biggest. Utilities are used to tackling technology issues and dealing with regulatory issues. For

many, however, developing a range of products and services that will please different customers is new. Recruiting

product and service development expertise from banks and credit card companies might be a good strategy.


9/84

www.smartgr idrea l i ty .com

Its time for reality about the smart grid.

The smart grid is a journeyone that ends with new ways to think about, manage and use our

precious energy resources. That journey starts here:www.smartgridreality.com

For the smart grid to mature, we need an honest discussion, stripped of the hype. Itrons new

site outlines what we see as critical components to making the smart grid a success.

Ready to know more? Visit www.smartgridreality.comfor a dose of reality.

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Letters to the Editor

Dear Editor:Although some short-term savings may be realized by

purchasing infrastructure (transformers, cable, transmissions

structures) from foreign countries, in the long term this will

reduce our domestic manufacturing capabilities. This is a

homeland security issue, and if and when that manufacturing

capability is required, it wont be under our control.

Jim Stephenson, P.E.

West Islip, N.Y.

{In reference to Achieving Breakthrough Savings From

Low-cost Countries, July/Aug. 2009]

* * *

Dear Editor:

Ninety-five percent of the electricity consumed in Indiana

comes from coal, which means Hoosier consumers have

enjoyed some of the lowest rates in the nation. In tough

economic times like these, affordable electricity is something

we cant do without. Yet a bill that has made its way through

the U.S. House of Representatives threatens to rob our

consumers of that very necessity. On June 26, the U.S. House

of Representatives approved H.R. 2454, the American Clean

Energy and Security Act 2009 (ACES), otherwise known asthe Waxman-Markey cap-and-trade bill. The measure passed

by a marginal vote of 219-212, indicating how diverse views

are on this issue. While improvements were made to the bill

before it passed the House, Indianas not-for-profit consumer-

owned municipal and cooperative power providers have

serious concerns about the impact this legislation will have on

residential, commercial and industrial customers in Indiana.

One improvement in the bill was an adjustment from a

100 percent auction of carbon emission allowances to a partial

auction, with some free allowances being given to carbon-

emitting entities. However, Indiana utilities are being shorted

more than 35 percent beginning in 2012. Too many allowancesare being provided to nonemitting sources and special interest

groups, such as merchant generating plants that do not directly

serve customers. The end result is a redistribution of wealth

from the Midwest, which is heavily reliant on coal for electricity

generation, to the East and West coasts, which are not. The

distribution of allowances to East and West coast states and

merchant plants will do nothing to reduce carbon emissions

and will dramatically increase Indiana electric rates.

Under the current allowance allocation formula,

Indianas not-for-profit utilities receive less than 65 percent

of allowances needed to meet consumer needs, requiring us

to purchase more than 35 percent of the allowances in an

unregulated and speculative trading market.As it now stands, the ACES Act could have a devastating

effect on Indiana ratepayers and our state economy. Electric

rates would increase at least 20 percent by 2012, and could

double by 2026. This would be an undue hardship for our

economy, industry and fixed-income residential customers.

As further debate takes place, we continue to

recommend:

That the emissions formula be fixed to provide allowances

only to entities that directly serve consumers with power

from carbon-emitting resources.

That utilities receive up to 100 percent of the allowances

needed to comply with the mandate to minimize the rateimpact of the cap-and-trade program. Allowance prices

should have a safety valve to mitigate price spikes.

That the unrealistic emissions reduction mandate of 17

percent below 2005 levels by 2020 be amended to a rea-

sonable and achievable level. Such a revision is necessary

to provide breathing room for utilities to invest in carbon-

reduction technology without dramatically increasing our

Indiana electric rates, hopefully preventing further loss of

business and industry.

That Congress fund research and development into

carbon-reduction technologies to meet carbon-cap man-

dates.

We are not opposed to climate change legislation; we

simply seek to protect our members and their consumers,

the ratepayers of Indiana. The current ACES Act does not

safeguard against unfair price increases to Indiana consumers.

We encourage you to engage your congressmen on this issue.

We will continue spreading the message of this bills negative

effect on Indiana and keep doing our part to protect Indianas

electric rates. We urge consumers to contact Sens. Richard

Lugar and Evan Bayh and voice their support for a fair, balanced

and affordable approach to climate change legislation. Learn

more about the issue at http://fairpowernow.org.Raj Rao,

president & CEO, Indiana Municipal Power Agency

Steve Smith,

president & CEO, Hoosier Energy

Rick Coons,

president & CEO, Wabash Valley Power Association

Bruce Graham,

CEO, Indiana Statewide Association of Rural Electric

Cooperatives

Please send your comments and letters to Editor in Chief Teresa Hansen, [email protected].
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: r nc p es an ract cesC O L U M N


A u t h o r

Penni McLean-Conner

is the vice president ofcustomer care at NSTAR,

the largest investor-

owned electric and gas

utility in Massachusetts.

McLean-Conner, a

registered professional

engineer, serves on

several industry boards

of directors, including

the Massachusetts

Technology

Collaborative and CSWeek. Her latest book,

Energy Efciency:

Principles and

Practices, is available

at http://pennwell

books.com.

Reducing energy wastehas become

a top priority in many states, hence the

rapid development and expansion of

energy efficiency (EE) programs na-

tionwide. Many energy thought leaders

ponder, How low can we go? Can we

achieve zero net energy buildings?

Yes, and zero net energy build-

ingswhich combine aggressive EE

measures with renewable distributedgeneration such as solarare in produc-

tion in the U.S. and around the world.

Massachusetts is one of several

states that have found zero net energy

buildings save energy costs and reduce

greenhouse gas (GHG) emissions. The

state has developed recommendations

to make zero net energy buildings the

norm by 2030. As utilities advance their

EE programs, it is important they de-

velop, understand and test strategies to

ensure zero net energy buildings are ap-propriately developed.

Zero Net Energy: What is It?

There are a variety of definitions with

respect to zero net energy buildings. A

2006 Department of Energy National

Renewable Energy Laboratory publica-

tion, Zero Energy Buildings: A Criti-

cal Look at the Definition, defines four

approaches:

Zero net site energy:Energy pro-

duced on-site is at least equal to the

energy used.

Zero net source energy: Energy

produced on-site is at least equal to

the energy used when energy use is

accounted for at its source. In this

case, there is accounting for energy

used to generate and deliver energyto the building.

Zero net energy cost:The money

a building owner pays a utility for

energy services and use is at least

equal to the amount that the utility

pays the owner for generating and

exporting energy.

Zero net energy emissions: On-

site production of emissions-free,

renewable energy is at least equal

to the energy used that comes from

emissions-producing sources.

Piloting Zero Net Energy Buildings

There are many efforts to advance build-

ing practices associated with zero net

energy buildings via pilots. These pilots

involve deep energy retrofits combined

with renewable distributed generation

achieving 50 to 90 percent reductions in

energy usage.

A deep retrofit on a residential

building, for example, involves ad-

vanced and fairly invasive EE measuresthat radically improve the energy per-

formance of an existing home. Dra-

matic energy reductions are achieved

by addressing all energy loads includ-

ing space conditioning, appliances, plug

loads and hot water. These projects are

costly because building practices and

materials are not yet standardized.

Efficiency measures that address

buildings shells are fundamental in

achieving energy reductions associated

with zero net energy buildings. Thesemeasures typically include an external

wall superinsulation build out, attic insu-

lation enhancements, foundation wall and

slab insulation, extensive whole-house air

sealing and high-performance windows.

These shell enhancements require a build

out of existing shells that involve build-

ing out window frames to support deeper

walls and building out roof eaves.

The EE measures are combined with

renewable energy sources. These mea-sures include leveraging natural daylight

to displace light fixtures, installing solar

hot water systems and augmenting with

distributed renewable generation.

To date in Massachusetts, five hous-

es have completed deep retrofits. John

Livermore remodeled his 1973 house to

achieve zero net energy. His efforts should

reduce energy use for heating 70 percent.

Livermore installed solar generation and

hot water to address the remaining energy

needs. He expects to produce excess elec-tricity equal to 1,500 kWh annually.

My motivation for taking action to

reduce our familys carbon footprint was

the understanding that carbon emissions

need to be reduced by about 90 percent

by 2030 in order to stabilize the earths

climate systems, and the realization that

I needed to take personal responsibil-

ity for reducing our emissions, Liver-

more said. We set out to demonstrate

what can be done to reduce the carbon

footprint of a suburban homeowner ona modest budget, with an overall goal to

reduce our homes net energy usage by

90 percent. We are currently well on our

way to achieving this target.

As utilities and other EE program

administrators expand EE plans, they

should include development of zero

net energy buildings. With research and

pilots devoted to zero net energy build-

ings, standardized building practices and

materials will become market-ready,

catapulting these building practices to acost-effective measure.

How Low Can We Go? Driving

to Zero Net Energy Buildingsby Penni McLean-Conner, NSTAR

A deep retrot on ahouse, for example,involves advancedand fairly invasiveEE measures thatradically improve theenergy performanceof an existing home,such as an externalwall superinsulationbuild out.
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13/84

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Power plants are among the largest and most complex engineering and construction projects

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14/84


15/84

Copyright 2009, Oracle. All rights reserved. Oracle is a registered trademark of Oracle Corporation and/or its affiliates.Other names may be trademarks of their respective owners.

oracle.com/goto/utilitiesor call 1.800.275.4775

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16/84

conom c nqu ryC O L U M N


A u t h o r

Tanya Bodell is vice

president of CRAInternational Inc. E-mail

her at [email protected].

The most impor-

tant single central

fact about a free

market is that no

exchange takes

place unless both

parties benet.

- Milton Friedman

Competitive wholesale electricity

markets in the U.S. have evolved sub-

stantially. There are now many ways an

electron, or the promise of an electron,

can generate value. As we move toward a

new energy economy, expect to see new

markets that define new values.

Energy-only Markets

Energy-only markets conceptually paya single price for power. This price is

supposed to cover the variable costs

of production (e.g., fuel and variable

operations and maintenance) and the

fixed costs (e.g., capital investment and

the return on that investment required to

encourage new entrants). Market price

caps, however, limit the magnitude of

price spikes, resulting in missing money

otherwise required to cover fixed costs

of production.

Capacity Markets

Capacity markets developed to

cover the missing money that power

suppliers could not earn in energy-only

markets. New England, New York,

PJM Interconnection and Midwest

Independent Transmission System

Operator Inc. (MISO) have implemented

capacity markets in some form, and prices

have been set by competitive auctions for

future megawatts of capacity. Demand-

side response has been a big winner insome of these markets, foreshadowing

the potential for price-responsive retail

consumption to participate in wholesale

markets.

Virtual Markets

Several wholesale electricity markets

include day-ahead and real-time

settlement. Day-ahead markets allow the

market operator to schedule generation

resources and set prices for market

participants in advance of actual real-time prices. The divergence of settlement

prices between day-ahead markets and

real-time spot markets created implicit

arbitrage opportunities. Virtual markets

arose to allow for explicit hedging

opportunities. Competition has since

whittled down the differential to reflect

a day-ahead risk premium.

Financial Transmission Rights

Locational marginal pricing considerstransmission constraints in setting the

market clearing price. For those markets

with nodal pricing, markets for financial

transmission rights hedge the basis

differential between generation node

and delivery point.

Generation Attributes

Renewable energy credits (RECs)

formalized a separately defined

property right associated with

renewable resources. Generationinformation certificates allowed for

further differentiation. Markets for

these environmental commodities

establish verifiable claims for green

power retailers and compliance with

renewable portfolio standards. RECs

are being further defined into solar

renewable energy credits (SRECs) to

generate separate revenue streams for

future solar installations, and there has

been discussion about alternative energy

portfolio standards that include energyefficiency in the separately traded form

of negawatts.

And More to Come ...

With advanced metering, smart grid

penetration and energy storage solutions,

the following markets already are in

discussion:

Frequency Markets:Higher wind

penetration creates operational

implications for the transmission

system. Whereas traditional marketancillary services focus on system

variability in minutes, hours and

days, generators contribute to pow-

er system frequency regulation by

controlling primary energy supply

rates in seconds to minutes. Not al-

ways able to self-supply frequency

control, increased wind penetration

may require new markets for fre-

quency support services.

Demand-side Bidding: Demand-side bidding has been incorporated

into energy markets on a limited ba-

sismost recently through capac-

ity markets. As automated demand

control equipment and hybrid elec-

tric vehicles offer energy storage

and demand response at the retail

level, wholesale electricity market

rules may be revisited. Demand-

side bidding would allow demand

resources, in combination with

generators, to set real-time prices,thereby creating a market that ac-

counts for and possibly changes the

price elasticity of demand.

Economists design markets to send

proper and transparent price signals to

decrease the transaction costs of match-

ing supply to demand. As competitive

wholesale electricity markets evolved,

market forces have been at work. Prop-

erty rights and new markets for transact-

ing those rights have developed. A worldwith energy efficiency, electricity storage

and renewable resources will need new

markets to further define the sources

and value of otherwise indistinguishable

electrons.

How should you respond? Be

prepared to participate. Reactive market

participants respond to opportunities

that new and transitioning markets

generate. Proactive firms increase profits

by directing the formation of these new

markets and then participating in thosemarkets with vantage.

Multipurpose Megawatts:

Markets Define New Valuesby Tanya Bodell, CRA International

iStockphoto.com/McIninch


17/84


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18/84

a ng t nto ccountC O L U M N


A u t h o r

Dan Watkiss is a partner

with Bracewell &Giuliani in Washington,

D.C., representing

power companies,

exploration and produc-

tion and midmarket

companies, natural

gas pipelines, power

and liqueed natural

gas project developers

and lenders, as well as

government agencies

and regulators. Youmay reach him at Dan.

[email protected].

The Federal Energy Regulatory

Commission (FERC) in a July order

endorsed its enforcement staffs report

that rejected allegations of the market

monitor for the New York Independent

System Operator Inc. (NYISO) that

certain circuitous wholesale electric

energy trades over eight paths in the

Northeast and Mid-Atlantic beginning in

2008 amounted to market manipulationor violations of the traders wholesale

power tariffs.

The NYISO monitor and others

had complained that the trades at issue

congested the power grid around Lake

Erie (attributable in part to a physical

phenomenon known as loop flow)

resulting in higher costs to power

consumers. FERCs order and the staff

report addressing these Lake Erie trades

are noteworthy in their articulation

of what distinguishes unlawfulmanipulation from transactions that

respond rationally to the price signals

from badly designed energy markets. As

energy markets expand geographically

and the volume of physical and financial

trading in energy products grows, this

distinction is likely to prove increasingly

important to the efficient design of

market structures and rules.

Laws and regulations proscribing

manipulation of energy markets have

proliferated in recent years. Mostrecently, the Federal Trade Commission

(FTC) announced it will put in place

in November new rules prohibiting

manipulation in wholesale petroleum

markets. The FTCs petroleum

regulations, implemented pursuant to

the Energy Independence and Security

Act of 2007, follow and largely track

FERCs earlier adoption of rules

forbidding manipulation of natural gas

and wholesale electric power markets.

All three sets of anti-manipulationrules are modeled on the Securities and

Exchange Commissions Rule 10b-5

that prohibits any act or omission that

results in fraud or deceit in connection

with the purchase of a security. The

specific anti-manipulation rule in the

Lake Erie order and report, similar to

Rule 10b-5, makes it a violation of the

Federal Power Act to use or employ any

device, scheme or artifice to defraud,

make an untrue statement of materialfact or omit a material fact or engage

in any act or practice that operates as a

fraud or deceit.

FERC and its staff determined

that the circuitously routed Lake Erie

trades caused the harms that the NYISO

monitor allegedthey contributed to

loop flows and power grid congestion,

increasing the cost of power to New

York consumersand for that reason

FERC authorized the NYISO to

prohibit prospectively the scheduling of

wholesale power trades over the eightidentified circuitous paths. Nevertheless,

the agency concluded that these trades

were not the product of any fraudulent

device, scheme or artifice. Rather,

they were induced by what the agency

characterized as a pricing methodology

mismatch among operators of the

New York, Ontario, Midwest and Mid-

Atlantic grid operators. During periods

of grid congestion, that mismatch made

it more profitable for a seller to schedule

through the four regional markets ratherthan more directly from source to sink.

Contrary to the NYISO monitor, that

pricing incentive simply exposed rather

than created a market inefficiency.

In analyzing the circuitously

scheduled transactions, FERC and its

staff detailed the profits and losses

traders incurred. That the circuitous

transactions more often than not were

profitable for sellers left the regulator

with no reason to doubt that theirmotive was simply one of responding to

price signals in the market. And because

FERC found no evidence that sellers

had attempted to affect price levels

artificially or conceal the circuitousness

of their scheduleseach leg of which

was correctly taggedthere was no

basis for finding market manipulation or

for imposing price mitigations available

under the NYISO tariff.

FERCs message in the Lake Erie

order and report is clear: If market

structures or rules make profitable andreward power transactions that are argu-

ably inefficient, that inefficiency will not

be mistaken as evidence of market ma-

nipulation. Rather, it will be received as

proof that the market structures or rules

are disjointed and in need of reform.

That message shows a more ma-

ture, deliberate approach to regulating

complex energy markets than charac-

terized earlier periods when any mar-

ket perturbation was assumed to be the

product of manipulation.

Misguided Market Design

or Market Manipulation?by Dan Watkiss, Bracewell & Guiliani

FERC determined that the circuitously routed Lake Erie trades caused the harms

that the NYISO monitor allegedthey contributed to loop flows and power

grid congestions, increasing the cost of power to New York consumersand

for that reason FERC authorized the NYISO to prohibit scheduling of wholesale

power trades over the eight identified circuitous paths.


19/84


__________________
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20/84

Industry Report


The utility financial rankings were described as quiet in 2005, very good in 2006 and remarkable in 2007. From these

descriptions, its clear that utilities financial performance trended upward for several years in a row. The 2008 financial

rankings, however, show a different trend. Jean Reaves Rollins, who has provided the financial data for this report for the past

few years, said the 2008 rankings indicate the industry is showing signs of weakness.

When interviewed for this report last year, the country was already experiencing the recessions impact, and Rollins

predicted that 2008 would see a turn down. She did not think a year ago, however, that it would hit utilities as hard as it did.

The financial services meltdown was just becoming apparent (last September), and its impact on the general economy

took most by surprise, Rollins said.

As in years past, Rollins, head of The C Three Groupa senior management and research advisory firm to the energy

industryprovided data and commentary for this report, which provides Electric Light & Powerreaders with a glimpse at

utilities financial performance and health. For readers who wish to compare the market results year-after-year, previous

reports are available in archived September-October issues at http://elp.com.

by Teresa Hansen, editor in chief

Showing Signsof Weaknesss

The 2008 Utility Financial Rankings
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21/84

Industry Report

Sep|Oct|2009 ELECTRICLIGHT&POWER| 21

Table 1: Total Revenue RankingsCompany Total Revenues Total Revenues Total Revenues Total Revenues 2007-2008 2005-2008

2005 2006 2007 2008 Growth Rate Growth RateConstellation Energy $16,968,300,000 $19,284,900,000 $21,193,200,000 $19,818,300,000 -6.49% 16.80%

Exe lon $15 ,357 ,000 ,000 $15 ,655 ,000 ,000 $18 ,916 ,000 ,000 $18 ,859 ,000 ,000 -0.30% 22.80%

Southern Co. $13,554,000,000 $14,356,000,000 $15,353,000,000 $17,127,000,000 11.55% 26.36%

FPL Group Inc. $11,846,000,000 $15,710,000,000 $15,263,000,000 $16,410,000,000 7.51% 38.53%

Dominion Resources $17,809,000,000 $16,297,000,000 $15,674,000,000 $16,290,000,000 3.93% -8.53%

AES Corp. $10,247,000,000 $11,576,000,000 $13,588,000,000 $16,070,000,000 18.27% 56.83%

PG&E $11,703,000,000 $12,539,000,000 $13,237,000,000 $14,628,000,000 10.51% 24.99%

American Electric Power $12,111,000,000 $12,622,000,000 $13,380,000,000 $14,440,000,000 7.92% 19.23%

Edison International $11,852,000,000 $12,622,000,000 $13,113,000,000 $14,112,000,000 7.62% 19.07%

Integrys Energy $6,962,700,000 $6,890,700,000 $10,292,400,000 $14,047,800,000 36.49% 101.76%

FirstEnergy $11,989,000,000 $11,501,000,000 $12,802,000,000 $13,627,000,000 6.44% 13.66%

Consolidated Edison $11,343,000,000 $11,962,000,000 $13,120,000,000 $13,583,000,000 3.53% 19.75%

Public Service

Enterprise Group Inc. $11,849,000,000 $11,762,000,000 $12,853,000,000 $13,322,000,000 3.65% 12.43%Duke Energy $6,906,000,000 $10,607,000,000 $12,720,000,000 $13,207,000,000 3.83% 91.24%

Entergy Corp. $10,106,247,000 $10,932,158,000 $11,484,398,000 $13,093,756,000 14.01% 29.56%

Reliant Resources $9,711,995,000 $10,877,385,000 $11,208,724,000 $12,553,210,000 11.99% 29.25%

Willia ms Companies $9,781,000,000 $9,376,000,000 $10,558,000,000 $12,352,000,000 16.99% 26.29%

Centerpoint Energy $9,722,000,000 $9,319,000,000 $9,623,000,000 $11,322,000,000 17.66% 16.46%

Xcel Energy Inc. $9,625,477,000 $9,840,304,000 $10,034,170,000 $11,203,156,000 11.65% 16.39%

Sempra Energy $11,512,000,000 $11,761,000,000 $11,438,000,000 $10,758,000,000 -5.95% -6.55%

PEPCO Holdings $8,065,500,000 $8,362,900,000 $9,366,400,000 $10,700,000,000 14.24% 32.66%

DTE Energy Co. $8,094,000,000 $8,159,000,000 $8,506,000,000 $9,329,000,000 9.68% 15.26%

Progress Energy $7,948,000,000 $8,724,000,000 $9,153,000,000 $9,167,000,000 0.15% 15.34%

N iSou rce $7,895,800,000 $7,490,000,000 $7,939,800,000 $8,874,200,000 11.77% 12.39%

PPL Corp. $5,539,000,000 $6,131,000,000 $6,498,000,000 $8,044,000,000 23.79% 45.22%

Ameren Corp. $6,780,000,000 $6,880,000,000 $7,546,000,000 $7,839,000,000 3.88% 15.62%

At mos $ 4, 961, 873 ,0 00 $6 ,1 52, 363, 00 0 $5, 898 ,4 31, 000 $ 7, 221, 305 ,0 00 2 2. 43% 45. 54 %

NRG $2,400,000,000 $5,585,000,000 $5,989,000,000 $6,885,000,000 14.96% 186 .88%

CMS Energy $5,879,000,000 $6,126,000,000 $6,464,000,000 $6,821,000,000 5.52% 16.02%

UGI $ 4, 888, 700 ,0 00 $5, 22 1, 000, 000 $5, 476 ,9 00, 000 $ 6, 648, 200 ,0 00 2 1. 39% 35. 99 %

NortheastUtilitie s System $7,346,220,000 $6,641,716,000 $5,822,226,000 $5,800,095,000 -0.38% -21.05%

El Paso Corp. $3,359,000,000 $4,281,000,000 $4,648,000,000 $5,363,000,000 15.38% 59.66%

SCANA Corp. $4,777,000,000 $4,563,000,000 $4,621,000,000 $5,319,000,000 15.10% 11.35%

MDU Resources $3,403,923,000 $4,004,539,000 $4,247,896,000 $5,003,278,000 17.78% 46.99%

Wisconsin Energy Corp. $3,815,500,000 $3,996,400,000 $4,237,800,000 $4,431,000,000 4.56% 16.13%

OGE Energy Corp. $5,911,500,000 $4,005,600,000 $3,797,600,000 $4,070,700 ,000 7.19% -31.14%

New Jersey Resources $3,184,582,000 $3,271,229,000 $3,021,765,000 $3,816,210,000 26.29% 19.83%

Nicor Inc. $3,357,800,000 $2,960,000,000 $3,176,300,000 $3,776,600,000 18.90% 12.47%

Al li an t $ 3, 279, 600 ,0 00 $3 ,3 59, 400, 00 0 $3, 437 ,0 00, 000 $ 3, 681, 700 ,0 00 7. 12% 12. 26 %

Dynegy $2,017,000,000 $1,770,000,000 $3,103,000,000 $3,549,000,000 14.37% 75.95%

Sierra Pacic $3,030,219,000 $3,355,950,000 $3,600,960,000 $3,528,113,000 -2.02% 16.43%

Questar $2,724,888,000 $2,835,600,000 $2,726,600,000 $3,465,100,000 27.09% 27.16%

Allegheny Energy $3,037,887,000 $3,121,489,000 $3,307,020,000 $3,385,900,000 2.39% 11.46%

TECO Energy $3,010,000,000 $3,448,100,000 $3,536,100,000 $3,375,300,000 -4.55% 12.14%

Pinnacle West $2,987,955,000 $3,401,748,000 $3,523,620,000 $3,367,076,000 -4.44% 12.69%

Puget Energy $2,578,008,000 $2,907,063,000 $3,220,147,000 $3,357,773,000 4.27% 30.25%

NSt ar $ 3, 243, 120 ,0 00 $3 ,5 77, 702, 00 0 $3, 261 ,7 84, 000 $ 3, 345, 387 ,0 00 2. 56% 3. 15 %

Hawaiian ElectricIndustries Inc. $2,215,564,000 $2,460,904,000 $2,536,418,000 $3,218,920,000 26.91% 45.29%

M ira nt $ 2, 620, 000 ,0 00 $3 ,0 87, 000, 00 0 $2, 019 ,0 00, 000 $ 3, 188, 000 ,0 00 5 7. 90% 21. 68 %

Southern Union $1,266,882,000 $2,340,144,000 $2,616,665,000 $3,070,154,000 17.33% 142.34%

AGL Resources Inc. $2,718,000,000 $2,621,000,000 $2,494,000,000 $2,800,000,000 12.27% 3.02%

WGL Holdings $2,163,343,000 $2,637,883,000 $2,646,008,000 $2,628,194,000 -0.67% 21.49%

Vectren $2,028,000,000 $2,041,600,000 $2,281,900,000 $2,484,700,000 8.89% 22.52%

National Fuel Gas Co. $1,860,774,000 $2,239,675,000 $2,039,566,000 $2,400,361,000 17.69% 29.00%

L acl ede $ 1, 597, 032 ,0 00 $1 ,9 97, 551, 00 0 $2, 02 1, 594, 000 $ 2, 208, 97 3,0 00 9. 27% 38. 32 %

Southwest Gas $1,714,283,000 $2,024,758,000 $2,152,088,000 $2,144,743,000 -0.34% 25.11%

Piedmont Natural Gas $1,761,091,000 $1,924,628,000 $1,711,292,000 $2,089,108,000 22.08% 18.63%

PNM Resources $1,566,110,000 $1,963,360,000 $1,914,029,000 $1,959,522,000 2.38% 25.12%

W es ta r $ 1, 583, 278 ,0 00 $1 ,6 05, 743, 00 0 $1, 72 6, 834, 000 $ 1, 838, 99 6,0 00 6. 50% 16. 15 %

Portland General Electric $1,446,000,000 $1,520,000,000 $1,743,000,000 $1,745,000,000 0.11% 20.68%

Avista Corp. $1,359,607,000 $1,506,311,000 $1,417,757,000 $1,676,763,000 18.27% 23.33%

Great Plains Energy $2,604,882,000 $2,675,349,00 0 $3,267,100,000 $1, 670,100,000 -48.88% -35.89%

DPL Inc. $1,284,900,000 $1,393,500,000 $1,515,700,000 $1,601,600,000 5.67% 24.65%

Equitable Resources Inc. $1,253,724,000 $1,267,910,000 $1,381,406,000 $1,576,488,000 14.12% 25.74%

Ene rgen $1,128,394,000 $1,393,986,000 $1,435,060,000 $1,568,910,000 9 .33% 39.04%

Unisource Energy $1,224,056,000 $1,308,141,000 $1,381,373,000 $1,397,511,000 1.17% 14.17%

CH Energy Group $972,506,000 $993,433,000 $1,196,757,000 $1,332,851,000 11.37% 37.05%

Otter Tail Corp. $981,869,000 $1,104,954,000 $1,238,887,000 $1,311,197,000 5.84% 33.54%

Northwest Natural Gas $910,486,000 $1,013,172,000 $1,033,193,000 $1,260,793,000 22.03% 38.47%

CL ECO $ 920, 154 ,0 00 $1 ,0 00, 675, 00 0 $1, 02 5, 419, 000 $ 1, 080, 19 8,0 00 5. 34% 17. 39 %

El Paso Electric $803,913,000 $816,455,000 $877,427,000 $1,038,930,000 18.41% 29.23%

Northweste rn Corp. $1,165,750,000 $1,132,653,000 $1,200,060,000 $1,037,855,000 -13.52% -10.97%

B lack H il ls $613,541,000 $656 ,882 ,000 $695,914,000 $1 ,005 ,790 ,000 44.53% 63.93%

South Jersey Industries $906,016,000 $931,428,000 $956,371,000 $961,977,000 0.59% 6.18%

I da Cor p $ 842, 864 ,0 00 $9 26, 291, 00 0 $87 9, 394, 000 $ 960, 41 4, 000 9. 21% 13. 95 %

UIL Holdings $812,223,000 $846 ,721 ,000 $981,999,000 $948,720,000 -3.39% 16.81%

Allete (Minnesota Power) $737,400,000 $767,100,000 $841,700,000 $801,000,000 -4.84% 8.62%

MGE Energy $513,370,000 $507,546,000 $537,594,000 $595,993,000 10.86% 16.09%

Empire District Electric Co. $362,720,000 $412,171,000 $490,160,000 $518,163,000 5.71% 42.85%

Central Vermont $311,359,000 $325,738,000 $329,107,000 $342,162,000 3.97% 9.89%

Chesapeake Utilities $229,629,736 $231,200,591 $258,286,000 $291,443,477 12.84% 26.92%

Florida Public Utilities $130,123,000 $134,393,000 $136,542,000 $168,548,000 23.44% 29.53%

Delta Natural Gas $84,181,233 $117,247,144 $98,168,000 $112,657,117 14.76% 33.83%

RGC Resources $121,647,787 $107,797,750 $89,901,000 $94,636,826 5.27% -22.20%

Energy West $67,888,984 $74,695,561 $59,373,000 $76,833,248 29.41% 13.17%

Total $399,355,355,740 $425,932,242,046 $453,204,283,000 $492,195,363,668 8.60% 23.25%

6.65% 6.40% 8.60% 8.60%

Source: The C Three Group

Company Total Revenues Total Revenues Total Revenues Total Revenues 2007-2008 2005-2008

2005 2006 2007 2008 Growth Rate Growth Rate

A number of utilities saw their revenues drop, in

many cases, reflecting rapidly decreasing unit sales,

especially in the last half of 2008, Rollins said.


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Industry Report


Table 2: Capital ExpendituresCompany CapEx 2005 CapEx 2006 CapEx 2007 CapEx 2008 Change from Change from

2007-2008 2005-2008FPL Group Inc. $2,477,000,000 $3,739,000,000 $4,319,000,000 $4,550,000,000 5.35% 83.69%

Duke Energy $2,327,000,000 $3,381,000,000 $3,125,000,000 $4,386,000,000 40.35% 88.48%

Southern Co. $2,370,000,000 $2,994,000,000 $3,545,000,000 $3,961,000,000 11.73% 67.13%


PG&E $1,804,000,000 $2,402,000,000 $2,769,000,000 $3,628,000,000 31.02% 101.11%

Dominion Resources $2,763,000,000 $3,659,000,000 $3,621,000,000 $3,554,000,000 -1.85% 28.63%

Willia ms Companies $1,299,000,000 $2,509,200,000 $2,816,000,000 $3,475,000,000 23.40% 167.51%

Ex el on $ 2, 165, 000 ,0 00 $2 ,4 18, 000, 00 0 $2, 674 ,0 00, 000 $ 3, 117, 000 ,0 00 1 6. 57% 43. 97 %

FirstEne rgy $1,208,000,000 $1,315,000,000 $1,633,000,000 $2,888,000,000 76.85% 139.07%

Edison International $1,868,000,000 $2,536,000,000 $2,826,000,000 $2,824,000,000 -0.07% 51.18%

El Paso Corp. $1,474,000,000 $2,164,000,000 $2,495,000,000 $2,757,000,000 10.50% 87.04%

AES Corp. $826,000,000 $1,460,000,000 $2,425,000,000 $2,735,000,000 12.78% 231.11%

Progress Energy $1,439,000,000 $1,686,000,000 $2,201,000,000 $2,555,000,000 16.08% 77.55%

Questar $712,700,000 $909,800,000 $1,383,500,000 $2,437,200,000 76.16% 241.97%

Consolidated Edison $1,617,000,000 $1,847,000,000 $1,928,000,000 $2,322,000,000 20.44% 43.60%

Sempra Energy $1,377,000,000 $1,907,000,000 $2,011,000,000 $2,295,000,000 14.12% 66.67%

Entergy Corp. $1,704,436,000 $1,795,472,000 $2,098,102,000 $2,212,255,000 5.44% 29.79%

Xcel Energy Inc. $1,304,468,000 $1,626,000,000 $2,095,721,000 $2,112,135,000 0.78% 61.92%

Constellat ion Energy $760,000,000 $962,900,000 $1,295,700,000 $1,934,100,000 49.27% 154.49%

Ameren Corporatio n $935,000,000 $992,000,000 $1,381,000,000 $1,896,000,000 37.29% 102.78%

Public ServiceEnterprise Group Inc. $1,053,000,000 $1,015,000,000 $1,348,000,000 $1,771,000,000 31.38% 68.19%

Sierra Pacic $686,394,000 $986,019,000 $1,197,326,000 $1,535,503,000 28.24% 123.71%

PPL Corp. $811,000,000 $1,394,000,000 $1,685,000,000 $1,418,000,000 -15.85% 74.85%

DTE Energy Co. $1,065,000,000 $1,403,000,000 $1,299,000,000 $1,373,000,000 5.70% 28.92%

Equitable Resources Inc. $275,454,000 $403,094,000 $776,667,000 $1,343,996,000 73.05% 387.92%

Northeast

Utilities System $775,355,000 $872,181,000 $1,114,824,000 $1,255,407,000 12.61% 61.91%OGE Energy Corp. $297,200,000 $486,600,000 $557,700,000 $1,184,500,000 112.39% 298.55%

Wisconsin Energy Corp. $745,100,000 $928,700,000 $1,211,500,000 $1,137,100,000 -6.14% 52.61%

Great Plains Energy $328,900,000 $481,600,000 $516,000,000 $1,023,700,000 98.39% 211.25%

Centerpoint Energy $693,000,000 $1,007,000,000 $1,114,000,000 $1,020,000,000 -8.44% 47.19%

Allegheny Energy $306,461,000 $447,325,000 $848,397,000 $994, 100,000 17.17% 224.38%

Ni So ur ce $ 590, 400 ,0 00 $6 37, 400, 00 0 $788 ,3 00, 000 $ 969, 900 ,0 00 2 3. 04% 64. 28 %

Westar $212,814,000 $344,860,000 $748,156,000 $937,242,000 25.27% 340.40%

Pinnacle West $633,532,000 $737,779,000 $918,581,000 $935,577,000 1.85% 47.68%

SCANA Corp. $385,000,000 $522,000,000 $725,000,000 $904,000,000 24.69% 134.81%

NRG $106,000,000 $221,000,000 $481,000,000 $899,000,000 86.90% 748 .11%

Al li an t $ 538, 100 ,0 00 $3 99, 000, 00 0 $542 ,0 00, 000 $ 879, 000 ,0 00 6 2. 18% 63. 35 %

Puget Energy $583,594,000 $749,516,000 $737,258,000 $846,001,000 14.75% 44.96%

CMS Energy $593,000,000 $670,000,000 $1,263,000,000 $792,000,000 -37.29% 33.56%

PEPCO Holdings $467,100,000 $474,600,000 $623,400,000 $781,000,000 25.28% 67.20%

MDU Resources $377,856,000 $479,872,000 $558,283,000 $746,478,000 33.71% 97.56%

Mirant $101,000,000 $133,000,000 $560,000,000 $731,000,000 30.54% 623.76%

Dynegy $195,000,000 $155,000,000 $379,000,000 $611,000,000 61.21% 213.33%

TECO Energy $295,300,000 $455,700,000 $494,400,000 $589,500,000 19.24% 99.63%

Southern Union $279,721,000 $347,896,000 $616,883,000 $588,611,000 -4.58% 110.43%

Integrys Energy $401,900,000 $337,500,000 $376,900,000 $532,800,000 41.36% 32.57%

Atmos $333,183,000 $425,324,000 $392,435,000 $472,273,000 20.34% 41.75%

En er ge n $ 230, 715 ,0 00 $3 02, 177, 00 0 $373 ,8 57, 000 $ 460, 237 ,0 00 2 3. 11% 99. 48 %

NStar $387,265,000 $426,146,000 $360,130,000 $422,224,000 17.24% 9.03%

National Fuel Gas Co. $219,530,000 $294,159,000 $276,728,000 $397,734,000 43.73% 81.18%

Vectren $231,600,000 $281,400,000 $334,500,000 $391,000,000 16.89% 68.83%

Portland General Electric $255,000,000 $371,000,000 $455,000,000 $383,000,000 -15.82% 50.20%

AGL Resources Inc. $267,000,000 $253,000,000 $259,000,000 $372,000,000 43.63% 39.33%

Unisource Energy $203,428,000 $238,261,000 $245,366,000 $349,289,000 42.35% 71.70%

PNM Resources $221,814,000 $321,118,000 $400,903,000 $344,951,000 -13.96% 55.51%

CLECO $159,393,000 $236,495,000 $510,192,000 $335,757,000 -34.19% 110.65%

Black Hills $136,279,000 $308,450,000 $261,371,000 $328,922,000 25.84% 141.36%

Reliant Resources $82,296,000 $96,793,000 $118,856,000 $310,462,000 161.21% 277.25%

Allete (Minnesota Power) $58,600,000 $102,300,000 $210,200,000 $301,100,000 43.24% 413.82%

Sou thwest Gas $294,369,000 $345,325,000 $340,875,000 $300,217,000 -11 .93% 1.99%

Hawaiian ElectricIndustries Inc. $223,675,000 $210,529,000 $218,297,000 $282,051,000 29.21% 26.10%

Otter Tail Corp. $59,969,000 $69,448,000 $161,985,000 $265,888,000 64.14% 343.38%

Nicor Inc. $201,900,000 $187,400,000 $173,200,000 $249,900,000 44.28% 23.77%

DPL Inc. $169,600,000 $335,600,000 $346,200,000 $243,600,000 -29.64% 43.63%

I da Cor p $ 193, 314 ,0 00 $2 25, 048, 00 0 $28 7, 751, 000 $ 243, 54 4, 000 -1 5. 36% 25. 98 %

UGI $158,400,000 $191,700,000 $223,100,000 $232,100,000 4.03% 46.53%El Paso Electric $104,151,000 $120,784,000 $196,988,000 $224,478,000 13.96% 115.53%

Avista Corp. $219,358,000 $165,085,000 $209,091,000 $222,698,000 6.51% 1.52%

UIL Holdings $60,303,000 $76,774,000 $248,202,000 $215,728,000 -13.08% 257.74%


Piedmont Natural Gas $191,407,000 $204,116,000 $135,231,000 $181,001,000 33.85% -5.44%

WGL Holdings $112,768,000 $159,757,000 $164,531,000 $134,961,000 -17 .97% 19.68%

Northwest Natural Gas $96,000,000 $97,000,000 $118,100,000 $124,563,000 5.47% 29.75%

MGE Energy $85,771,000 $92,575,000 $136,258,000 $105,777,000 -22.37% 23.32%

Northwestern Corp. $80,877,000 $101,046,000 $258,341,000 $103,998,000 -59.74% 28.59%

CH Energy Group $63,879,000 $75,070,000 $84,601,000 $84,198,000 -0.48% 31.81%

New Jersey Resources $52,801,000 $66,293,000 $63,524,000 $73,446,000 15.62% 39.10%

South Jersey Industries $92,906,000 $73,677,000 $55,539,000 $61,972,000 11.58% -33.30%

Laclede $60,203,000 $63,416,000 $58,870,000 $56,621,000 -3.82% -5.95%

Central Vermont $17,558,000 $19,504, 000 $23,663,000 $36,835,000 55.66% 109.79%

Chesapeake Utilities $33,008,235 $48,845,828 $31,277,000 $30,755,845 -1.67% -6.82%

Florida Public Utilities $12,441,000 $13,116,000 $16,740,000 $11,227,000 -32.93% -9.76%

RGC Resources $7,427,000 $7,815,000 $6,004,000 $6,539,369 8.92% -11.95%

Delta Natural Gas $5,338,356 $7,781,396 $8,083,000 $5,563,667 -31.17% 4.22%

Energy West $2,187,614 $1,865,594 $2,407,000 $3,869,832 60.77% 76.90%

Total $51,086,137,205 $66,760,607,818 $79,629,387,000 $93,821,865,713 17.82% 83.65%

30.68% 19.28% 17.82% 17.82%


Company CapEx 2005 CapEx 2006 CapEx 2007 CapEx 2008 Change from Change from

2007-2008 2005-2008

2008 Utility Financial Rankings

2008 saw a decrease in capital expenditure growth,

but not an actual decrease in capital spending from

2007 to 2008. Rollins expects this trend to continue

in 2009.


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Industry Report



Table 3: Income From Continuing OperationsCompany Income From Income From Income From Income From

Continuing Continuing Continuing Continuing Change from Change fromOperations 2005 Operations 2006 Operations 2007 Operations 2008 2007-2008 2005-2008

Exelon $965,000,000 $1,592,000,000 $2,736,000,000 $2,717,000,000 -0.69% 181.55%

Dominion Resources $1,033,000,000 $1,530,000,000 $2,705,000,000 $1,836,000,000 -32.13% 77.73%

Southern Co. $1,591,000,000 $1,573,000,000 $1,734,000,000 $1,742,000,000 0.46% 9.49%

FPL Group Inc. $901,000,000 $1,281,000,000 $1,312,000,000 $1,639,000,000 24.92% 81.91%

Willia ms Companies $473,000,000 $3 47,000,000 $847,0 00,000 $1,418,000,000 67.41% 199.79%


FirstEnergy $891,000,000 $1,254,000,000 $1,309,000,000 $1,342,000,000 2.52% 50.62%

Duke Energy $893,000,000 $1,080,000,000 $1,522,000,000 $1,279,000,000 -15.97% 43.23%

Entergy Corp. $943,125,000 $1,133,098,000 $1,134,849,000 $1,220,566,000 7.55% 29.42%

AES Corp. $365,000,000 $176,000,000 $495,000,000 $1,216,000,000 145.66% 233.15%

Edison International $1,137,000,000 $1,181,000,000 $1,098,000,000 $1,215,000,000 10.66% 6.86%

Mirant ($1,385,000,000) $1,752,000,000 $433,000,000 $1,215,000,000 180.60% -187.73%

PG& E $ 904, 000 ,0 00 $9 91, 000, 00 0 $1, 006 ,0 00, 000 $ 1, 184, 000 ,0 00 1 7. 69% 30. 97 %

Sempra Energy $913,000,000 $1,091,000,000 $1,125,000,000 $1,113,000,000 -1.07% 21.91%

NRG $68 ,000 ,000 $543,000,000 $569,000,000 $1,016,000,000 78.56% 1394.12%

Public ServiceEnterprise Group Inc. $837,000,000 $679,000,000 $1,319,000,000 $983,000,000 -25.47% 17.44%

Consolidated Edison $745,000,000 $740,000,000 $925,000,000 $922,000,000 -0.32% 23.76%

PPL Corp. $678,000,000 $865,000,000 $1,288,000,000 $922,000,000 -28.42% 35.99%

El Paso Corp. ($506,000,000) $531,000,000 $436,000,000 $823,000,000 88.76% -262.65%

Progress Energy $523,000,000 $551,000,000 $693,000,000 $773,000,000 11.54% 47.80%

Questar $325,681,000 $444,100,000 $507,400,000 $683,800,000 34.77% 109.96%

Xcel Energy Inc. $508,731,000 $567,513,000 $573,107,000 $645,720,000 12.67% 26.93%

Ameren Corp. $628,000,000 $547,000,000 $618,000,000 $605,000,000 -2.10% -3.66%

DTE Energy Co. $537,000,000 $433,000,000 $971,000,000 $546,000,000 -43.77% 1.68%

Centerpoint Energy $225,000,000 $432,000,000 $399,000,000 $447,000,000 12.03% 98.67%

Allegheny Energy $63,065,000 $319,321,000 $412,214,000 $395,400,000 -4.08% 526.97%

Wisconsin Energy Corp. $303,600,000 $312,500,000 $336,500,000 $358,600,000 6.57% 18.12%

SCANA Corp. $320,000,000 $310,000,000 $320,000,000 $346,000,000 8.13% 8.13%

En er ge n $ 173, 012 ,0 00 $2 73, 570, 00 0 $309 ,2 33, 000 $ 321, 915 ,0 00 4. 10% 86. 07 %

Dynegy $81,000,000 ($308,000,000) $324,000,000 $319,000,000 -1.54% 293.83%

CMS Energy ($94,000,000) ($90,000,000) ($227,000,000) $300,000,000 -232.16% -419.15%

PEPCO Holdings $371,200,000 $248,300,000 $334,200,000 $300,000 ,000 -10.23% -19.18 %

Southern Union $153,096,000 $217,083,000 $228,711,000 $295,151,000 29.05% 92.79%

MDU Resources $265,291,000 $307,778,000 $322,786,000 $293,673,000 -9.02% 10.70%

Alliant $56,400,000 $338,300,000 $424,700,000 $280,000,000 -34.07% 396.45%

National Fuel Gas Co. $189,488,000 $138,091,000 $337,455,000 $268,728,000 -20.37% 41.82%

NortheastUtilities System ($256,903,000) $132,936,000 $245,896,000 $260,828,000 6.07% -201.53%

Equitable Resources Inc. $258,574,000 $216,025,000 $257,483,000 $255,604,000 -0.73% -1.15%

DPL Inc. $174,400,000 $139,600,000 $221,800,000 $244,500,000 10.23% 40.19%

NStar $196,135,000 $206,774,000 $221,515,000 $237,547,000 7.24% 21.11%

OGE Energy Corp. $161,200,000 $262,100,000 $244,200,000 $231,400,000 -5.24% 43.55%

AGL Resources Inc. $193,000,000 $212,000,000 $211,000,000 $217,000,000 2.84% 12.44%

UGI $187,500,000 $176,200,000 $204,300,000 $215,500,000 5.48% 14.93%

Pinnacle West $223,163,000 $317,143,000 $298,780,000 $213,557,000 -28.52% -4.30%

Sierra Pacic $82,237,000 $277,451,00 0 $197,295,000 $208,887,000 5.88% 154.01%

Atmos $135,785,000 $147,737,000 $168,492,000 $180,331,000 7.03% 32.81%

W es ta r $ 134, 868 ,0 00 $1 65, 309, 00 0 $168 ,3 54, 000 $ 178, 140 ,0 00 5. 81% 32. 08 %

TECO Energy $211,000,000 $244,400,000 $398,900,000 $162,400,000 -59.29% -23.03%

Puget Energy $146,283,000 $167,224,000 $184,464,000 $154,929,000 -16.01% 5.91%

Vectren $136,800,000 $108,800,000 $143,100,000 $129,000,000 -9.85% -5.70%

Integrys Energy $157,400,000 $155,800,000 $251,300,000 $124,800,0 00 -50.34% -20.71%

Great Plains Energy $160,700,000 $126,000,000 $157,600,000 $119,500,000 -24.18% -25.64%

Nicor Inc. $136,300,000 $128,300,000 $135,200,000 $119,500,000 -11.61% -12.33%

WGL Holdings $106,072,000 $94 ,694 ,000 $107,900,000 $116,523,000 7 .99% 9.85%

New Jersey Resources $18,535,000 $221,908,000 $65,281,000 $113,910,000 74.49% 514.57%

Piedmont Natural Gas $101,270,000 $97,189,000 $104,387,000 $110,007,000 5.38% 8.63%

CLECO $180,779,000 $72 ,856 ,000 $151,331,000 $102,141,000 -32 .50% -43 .50%

I da Cor p $ 63, 661, 00 0 $1 00, 075, 00 0 $82 ,2 72, 000 $ 98, 414 ,0 00 1 9. 62% 54. 59 %

Hawaiian ElectricIndustries , Inc. $126,689,000 $108,001,000 $84,779,000 $90,278,000 6.49% -28.74%

Portland General Electric $64,000,000 $71,000,000 $145,000,000 $87,000,000 -40.00% 35.94%

Allete (Minnesota Power) $17,600,000 $77,300,000 $87,600,000 $82,500,000 -5.82% 368.75%

NiSource $306,800,000 $281,800,000 $321,400,000 $79,000,000 -75.42% -74.25%

El Paso Electric $35,522,000 $67,450,000 $74,753,000 $77,621,000 3.84% 118.52%

South Jersey Industries $39,770,000 $72,250,000 $62,659,000 $77,178,000 23.17% 94.06%Avista Corp. $44,988,000 $72,941,000 $38,475,000 $73,620,000 91.35% 63.64%

Northwestern Corp. $61,547,000 $37,900,000 $53,191,000 $69,525,000 30.71% 12.96%

Northwest Natural Gas $58,149,000 $63,415,000 $74,497,000 $67,601,000 -9.26% 16.25%

Sou thwest Gas $43 ,823 ,000 $83 ,860 ,000 $83 ,246 ,000 $60 ,973 ,000 -26 .76% 39.13%

L acl ede $ 40, 070, 00 0 $4 8, 989, 000 $49 ,7 71, 000 $ 57, 526 ,0 00 1 5. 58% 43. 56 %

MGE Energy $32,091,000 $42,423,000 $48,825,000 $52,768,000 8.08% 64.43%

UIL Holdings $33 ,476 ,000 $58,716,000 $46 ,693 ,000 $48,385,000 3 .62% 44.54%


Otter Tail Corp. $53,902,000 $51,112,000 $53,225,000 $35,125,000 -34.01% - 34.84%

CH Energy Group $44,291,000 $43,084,000 $42,636,000 $35,081,000 -17.72% -20.79%

Central Vermont $5,978,000 $17,984,000 $15,436,000 $16,017,000 3.76% 167.93%

Unisource Energy $52,253,000 $6 9,243,000 $58,3 73,000 $14,021,000 -75.98% -73.17%

Chesapeake Utilities $10,467,614 $10,506,525 $13,198,000 $13,607,259 3.10% 29.99%

Delta Natural Gas $4,998,619 $5,024,635 $5,298,000 $6,829,868 28.91% 36.64%

RGC Resources $3,387,933 $3,511,531 $3,806,000 $4,257,824 11.87% 25.68%

Florida Public Utilities $4,219,000 $4,140,000 $3,272,000 $3,457,000 5.65% -18.06%

Energy West $927,713 $1,911,249 $2,257,480 $3,311,375 46.68% 256.94%

Bl ack Hi ll s $ 32, 792 ,00 0 $7 4, 046, 000 $10 0, 124, 000 ($52,167,000) -152.10% -259.08%

PNM Resources $51,113,000 $107,960,000 $59,3 58,000 ($305,272,000) -614.29% -697.25%

Reliant Resources ($330,556,000) ($327,812,000) $365,107,000 ($748,112,000) -304. 90% 126.32%

Constellat ion Energy $535,900,000 $748,600,000 $822,400,000 ($1,314,400,000) -259.82% -345.27%

Total $21,412,590,879 $30,088,559,940 $36,991,565,480 $34,819,424,326 -5.87% 62.61%

40.52% 22.94% -5.87% -5.87%


Company Income From Income From Income From Income From

Continuing Continuing Continuing Continuing Change from Change fromOperations 2005 Operations 2006 Operations 2007 Operations 2008 2007-2008 2005-2008

While utilities have focused on adjusting to and oper-

ating in the economic recession, many have an even

bigger issue to address pending environmental

legislation.


25/84


26/84

Industry Report



Table 4: Free Cash FlowCompany Calculated Free Calculated Free Calculated Free Calculated Free

Cash Flow Cash Flow Cash Flow Cash Flow2005 2006 2007 2008

Exelon ($18,000,000) $2,417,000,00 0 $1,822,000,000 $3,434,000,000 88.47% -19177.78%

Entergy Corp. ($236,628,000) $1,652,367,000 $461,668,000 $1,111,745,000 140.81% -569.83%

Public ServiceEnterprise Group Inc. ($104,000,000) $916,000,000 $570,000,000 $574,000,000 0.70% -651.92%

NRG ($38,000,000) $187,000,000 $1,036,000,000 $535,000,000 -48.36% -1507.89%

UGI $279,300,000 $87 ,700 ,000 $233,100,000 $232,300,000 -0.34% -16 .83%

DTE Energy Co. ($64,000,000) $53,000,000 ($174,000,000) $186,000,000 -206.90% -390.63%

PPL Corp. $577,000,000 $364,000,000 ($114,000,000) $171,000,000 -250.00% -70.36%

NStar ($26,886,000) $533,461,000 $131,250,000 $120,864,000 -7.91% -549.54%

DPL Inc. $134,000,000 ($48,800,000) ($28,100,000) $119,600,000 -525.62% -10.75%

En er ge n $ 104, 409 ,0 00 $1 80, 743, 00 0 $110 ,3 10, 000 $ 108, 996 ,0 00 - 1. 19% 4. 39 %

National Fuel Gas Co. $ 97,816,000 $177,241,000 $117,469,000 $85,042,000 -27.60% -13.06%

Northwest Natural Gas ($16,934,000) $51,566,000 $65,540,000 $73,763,000 12.55% -535.59%New Jersey Resources $152,021,000 ($89,286,000) $58,882,000 $58,922,000 0.07% -61.24%

MDU Resou rces $105,383,000 $179 ,603 ,000 $4,909,000 $39 ,709 ,000 708 .90% -62 .32%

Vectren $36,800,000 $28,800,000 ($36,400,000) $32,200,000 -188.46% -12.50%

CH Energy Group ($19,129,000) $12,818,000 ($51,522,000) $25,087,000 -148.69% -231.15%

Energy West ($1,451,146) $6,663,703 ($3,678,000) $1,567,451 -142.62% -208.01%

Florida Public Utilities ($2,228,000) $6,974,000 ($2,214,000) $1,393,000 -162.92% -162.52%

De lt a Nat ur al Gas $ 2, 034, 080 ($1,358,348) $6, 403 ,0 00 $ 1, 028, 864 -8 3. 93% - 49. 42 %

Southwest Gas ($56,745,000) ($63,971,000) $6,936,000 ($469,000) -106.76% -99.17%

Chesapeake Utilities ($19,719,672) ($18,728,830) ($5,595,000) ($2,213,456) -60.44% -88.78%

RGC Resources ($1,913,105) $2,481,460 $617,000 ($6,319,504) -1124.23% 230.33%

Central Vermont ($12,289,000) $6,665,000 $10,429,000 ($8,435,000) -180.88% -31.36%

Laclede $42,834,000 ($71,682,000) $22,421,000 ($20,089,000) -189.60% -146.90%

Hawaiian Electric

Industries Inc. ($5,237,000) $75,523,000 ($1,056,000) ($24,127,000) 2184.75% 360.70%

MGE Energy ($32,394,000) $8,464,000 ($59,672,000) ($31,065,000) -47.94% -4.10%

South Jersey Industries ($53,580,000) ($44,603,000) $92,307,000 ($35,583,000) -138.55% -33.59%

Mirant ($489,000,000) $4,000,000 $226,000,000 ($54,000,000) -123.89% -88.96%

El Paso Electric $2,439,000 $97,214,000 ($14,678,000) ($54,745,000) 272.97% -2344.57%

Northweste rn Corp. $65,723,000 $64,032,000 ($56,377,000) ($69,277,000) 22.88% -205.41%

Unisource Energy $70,455,000 $44,398,000 $77,400,000 ($72,278,000) -193.38% -202.59%

WGL Holdings ($25,961,000) $53,541,000 $48,767,000 ($72,999,000) -249.69% 181.19%

UIL Holdings $26,655,000 ($29,641,000) ($143,583,000) ($73,425,000) -48.86% -375.46%

Southern Union ($61,084,000) $110,909,000 ($146,475,000) ($101,784,000) -30.51% 66.63%

IdaCorp ($31,818,000) ($55,270,000) ($207,150,000) ($107,031,000) -48.33% 236.39%

Avista Corp. ($89,124,000) $36,381,000 $42,550,000 ($107,320,000) -352.22% 20.42%

Piedmont Natural Gas ($8,031,000) ($100,303,000) $98,270,000 ($111,799,000) -213.77% 1292.09%

Williams Companies $150,900,000 ($619,600,000) ($579,000,000) ($120,000,000) -79.27% -179.52%

Empire District

Electric Co. $5,533,000 ($152,028,000) ($79,728,000) ($120,288,000) 50.87% -2274.01%

Pinnacle West $96,764,000 ($344,277,000) ($260,645,000) ($122,009,000) -53.19% -226.09%

Reliant Resources ($999,459,000) $1,179,080,000 $642,887,000 ($127,767,000) -119.87% -87.22%

Allegheny Energy $179,659,000 $315,779,000 $146,662,000 ($132,700,000) -190.48% -173.86%

AGL Resources Inc. ($187,000,000) $101,000,000 $117,000,000 ($145,000,000) -223.93% -22.46%

Allete (Minnesota Power) ($5,100,000) $40,200,000 ($87,100,000) ($149,000,000) 71.07% 2821.57%

Otter Tail Corp. $35,831,000 $10,798,000 ($77,173,000) ($154,567,000) 100.29% -531.38%

Centerpoint Energy ($592,000,000) ($16,000,000) ($340,000,000) ($169,000,000) -50.29% -71.45%

Black Hills $38,570,000 ($48,755,000) ($9,292,000) ($183,281,000) 1872.46% -575.19%

Portland

General Electric $117,000,000 ($265,000,000) ($111,000,000) ($200,000,000) 80.18% -270.94%

TECO Energy ($118,200,000) $111,200,000 $59,600,000 ($201,700,000) -438.42% 70.64%

CMS Energy $53,000,000 $18,000,000 ($1,236,000,000) ($233,000,000) -81.15% -539.62%

CLECO $90,338,000 ($145,052,000) ($247,167,000) ($246,231,000) -0.38% -372.57%

PNM Resources ($11,706,000) ($76,694,000) ($178,370,000) ($256,854,000) 44.00% 2094.21%

Nicor Inc. $4,300,000 $259,600,000 $79,000,000 ($277,300,000) -451.01% -6548.84%

Integrys Energy ($324,500,000) ($264,600,000) ($138,400,000) ($282,800,000) 104.34% -12.85%

Atmos $53,761,000 ($113,875,000) $154,660,000 ($291,942,000) -288.76% -643.04%

Dynegy ($

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Electric Light & Power - September,October 2009 (Malestrom)

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