Holding companies rule; top 10 sell 28% of U.S. Electricity

Michael T. Burr

Managing Editor

The top 10 investor-owned utility holding companies sold about 28 percent of the electricity sold by U.S. utilities in 1998 (See Table 8, “IOU holding companies-25 largest generators”).

The biggest of the big holding companies, Southern Co., is the biggest utility in the country-bigger even than the mammoth Tennessee Valley Authority (TVA) (see Table 4, “Largest 100 utility generators”). Southern produced nearly 5 percent of the power generated by U.S. utilities last year.

These are a few of the interesting facts to emerge from the EL&P top 100 utilities operating report. This year the report updates information provided in earlier installments, with some key differences. First, the data originate from a new source-Navigant Consulting of Peoria, Ill. (full contact information at end of story).

Navigant`s Energy Knowledge System (EKS) data strengthens EL&P`s ability to analyze utilities` relative operating positions. The change of data source, however, forced EL&P to sacrifice some year-to-year comparisons.

For example, last year EL&P did not publish a ranking of the top coal-fired plant fleets. And this year, we`ve adopted a more careful approach to analyzing costs. Consultation with Navigant revealed serious pitfalls in comparing cost-of-service figures between wildly different types of utility companies. We adopted the most valid approach, which is to rank companies separately by generation costs per megawatt-hour and distribution costs per customer. Transmission cost rankings are problematic and not especially interesting for this report, so we omitted them.

The EKS includes information from all the country`s investor-owned utilities (operating companies, not holding companies), plus public power companies such as federal power authorities, rural electric cooperatives and municipal utilities. Data from public power companies, however, were not available at press time. Therefore, their 1997 data were included for comparison purposes.

With this in mind, the largest generating utilities in the United States continue to be agencies of the federal government-TVA and the Bonneville Power Administration. The top five positions in terms of total MWh generated are identical between 1997 and 1998.

TXU, Commonwealth Edison and Duke Energy follow the aforementioned federal power agencies in the top 100 utility generators ranking. Florida Power & Light information was not available at press time. Using 1997 data, the company ranks No. 6.

One serious omission of this report is, obviously, the increasingly important role of unregulated power generators. As more power plants move into unregulated hands, their position in the industry becomes more significant. EL&P is working with Navigant to develop a more valid and comprehensive ranking of generators for next year.

Smooth operators

The power plant heat rate rankings are among the most popular features of EL&P`s annual top 100 utility operating report.

For the first time since EL&P began tracking power plant heat rates in 1996, Texas Utilities` Monticello coal-fired plant entered the top 25 ranking-in the number one position (See Table 3, “Coal-fired heat rates-25 best plants”). The plant reported an annual average heat rate below 9,000 Btu per kWh to edge out perennial plant heat rate leaders owned by Duke Energy and the TVA.

While TVA and Duke were edged out for the best plant heat rate, they continue to impress as high-efficiency operators. Duke`s coal fleet captured first-place honors (See Table 7, “Coal-fired fleet heat rates-top 50 companies”). Most exemplary are its Belews Creek and Marshall coal-fired plants, ranked 1 and 2 last year, and second and third this year. Among nuclear plants, Duke`s Mcguire and Catawba generators were the second- and seventh-cheapest to operate, averaging $12.31 per MWh and $14.06/MWh, respectively.

With 9,073 Btu/kWh, TVA`s Bull Run plant was ranked third in heat rate, the same as last year. Overall, TVA`s 17,400 MW, coal-fired fleet managed an average heat rate of 10,056 Btu/kWh, securing a 43rd-place ranking for the organization. Further, TVA`s Sequoyah, Watts Bar and Browns Ferry nuclear plants ranked ninth, 13th and 15th, respectively, in terms of operating costs among U.S. nuclear facilities, with total costs of $14.55, $15.72 and $16.05/MWh (See Table 1, “Nuclear production costs-20 best plants”).

The most cost-effective nuclear plant, however, was Old Dominion Electric Cooperative`s North Anna plant, generating a megawatt-hour for $11.58. Old Dominion also did well in the coal-fired plant rankings, with its Clover plant averaging a 9,471 Btu/kWh heat rate to take 24th position. As the solo plant in Old Dominion`s “fleet,” Clover secured fourth place for the company in the fleet ranking. It did not figure in last year`s heat rate rankings.

The country`s nuclear fleet cost leader is North Carolina East Municipal, which operated 472 MW with costs of $9.96/MWh (See Table 9, “Nuclear production costs-25 best companies”). The top five are rounded out by Atlantic City Electric (401 MW at $10.65), Northern States Power (1,755 MW at $11.40), Southern California Edison (2,357 MW at $11.58) and the aforementioned Old Dominion (227 MW, $11.58).

Top utilities

As in years past, this year EL&P ranks utilities on their wholesale purchases (Table 2, “Top IOU wholesale electricity purchasers”). However, because 1998 data were available only for IOUs, public power utilities are omitted; using 1997 data would be a bad idea, since power purchases can vary widely from year to year.

Southern California Edison was the biggest IOU purchaser of wholesale power in 1998, buying 42 TWh of electricity, some 55 percent of its total electric sales. Edison ranked second last year to PacifiCorp, which ranks second this year with nearly 40 TWh.

Last year`s third-place wholesale purchaser, Portland General Electric, falls to 12th place this year. PG&E and PECO Energy, fourth and fifth last year, take fourth and third, respectively, this year. PP&L Inc. comes out of nowhere to occupy the fifth slot this year.

Cost profiles are difficult to compare from last year to this year. This year`s ranking, however, is a more valid representation of costs for generation and distribution (Table 5, “Generating costs-best 100 companies” and Table 6, “Distribution costs-best 100 companies”).

Regarding generating costs, the top performers are, predictably, hydro-oriented companies. Notable cost leaders among diversified, major utilities are mostly public power entities, such as the Los Angeles Department of Water & Power, the New York Power Authority and TVA.

The lowest distribution costs per customer are small IOUs. The industry leader, Exeter & Hampton Electric, serves less than 40,000 customers. The million-customer mark isn`t reached in this ranking until sixth-place Public Service Company of Colorado. Other larger utilities that are leaders in terms of distribution costs include FP&L, Virginia Electric & Power and PSE&G.

The EL&P top 100 operating performance report offers a statistical snapshot of the industry, but what it does not show is the corporate cultural factors that affect performance. Those utilities that prioritize quality in all their business processes ultimately operate in a more efficient, cost-effective way.

As these utilities have learned, quality is not just a source of pride; it`s good business.

Editor`s note: The data for this report were provided by Navigant Consulting Inc. of Springfield, Ill. Navigant`s Energy Knowledge System (EKS) for the electric and gas industries contains financial, operating and demographic information for investor-owned electric utilities and operating/power supply data for over 3,000 public power utilities and cooperatives. EKS also includes complete financial and operating data for gas pipelines and source and use data for over 2,000 IOU and municipal LDCs.

Contact: Samuel L. Xanders, Director, Navigant Consulting, 3900 Wood Duck Drive, Ste. D, Springfield, IL 62707 / Phone: (217) 241-1450 / Fax: (217) 241-1459 / email: sxanders@ metzassoc.com

Navigant Consulting Inc. (formerly Metzler Group Inc.) is located at 615 N. Wabash, Chicago, IL 60611 / Phone: (847) 945-0001 / Fax: (847) 945-0240 / Email: info@metzassoc.com

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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