Most Utilities Won’t Follow in California Utilities’ Footsteps, Report Says

Most utility company executives believe their companies will fare better than California’s utilities in developing competitive energy markets. This is according to a new Andersen report titled “Energy Crisis in the Western United States: Lessons for Navigating Regulatory and Market Minefields.” Senior executives from 16 utilities outside California with a combined market capitalization of more than $120 billion and $145 billion in revenues responded to an Andersen survey. These executives shared their views about the impacts they believe the California power crises will have on their companies and the electric industry. The survey, conducted between February 19, 2001, and March 2, 2001, by Knowledge Systems & Research Inc., Syracuse, N.Y., found that the companies are observing the California situation carefully. Most expect a slowing, but not a turnaround, of deregulation. They believe their internal plans and preparations are on-target for the changing environment.

The report identifies eight overriding implications emanating from the Western energy crises that are shaping the longer-term operations of the Western grid, the regional and national economy, domestic energy policy and the industry’s evolution. The report also identifies some action items that will help utilities prepare for competition and combat a potential California “virus.”

“California has demonstrated that the risks in the electricity industry, if not properly acknowledged and managed, can simultaneously and profoundly impact all market participants. To be effectively managed, these risks need to be exposed, assumed or shared, measured and monitored. When they are hidden or ignored, all parties can potentially suffer. A shared, integrated view of these risks and a strategy for their assumptions and management is critical to avoiding rapid value destruction within the energy market,” Andersen’s national utility practice head Matthew Smith told a Washington briefing.

Copies of the 28-page report can be downloaded from the Energy and Utilities Web page at www.andersen.com.

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