Utility News

Christian Science Monitor (opinion):

The seven thirsty states that drink from the Colorado River have learned a lot about conserving water, from desert landscaping to underground storage. But a credible new study shows that won’t be enough to solve the region’s water supply problem.

Tough choices lie ahead.

The study by the National Research Council used tree-ring differences to track the history of water flow in the river basin. It revealed that the years prior to a 1922 compact that set multistate sharing were exceptionally wet. That pact is still in effect.

Extended droughts, such as the one the region has been experiencing since 2000, have been common. The seven states – Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming – should be prepared for extended and possibly more severe droughts, according to the study. Right now, the basin’s two big reservoirs, Lake Mead and Lake Powell, are about half full.

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The Times-Leader:

Commonwealth Telephone Enterprises Inc. reported a nearly 19 percent drop in revenue for the fourth quarter, attributing it mainly to fees associated with the upcoming $1.16 billion sale to Citizens Communications Co.

The deal announced last September could be completed as early as March 8 if the Pennsylvania Public Utility Commission approves the sale at its upcoming meeting Thursday.

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Reuters via the New York Times:

Enel, an Italian utility, said it had bought a 10 percent stake in Endesa, the Spanish utility, for 4.1 billion euros ($5.4 billion), possibly breaking up an attempt by a German company, E.On, to buy Endesa. Enel, based in Rome, said it had acquired 9.99 percent of Endesa at 39 euros a share, above E.On’s bid of 38.75 euros and Endesa’s closing price of 38.12 euros. E.On raised its offer for Endesa this month to 41 billion euros ($54.2 billion) and emerged as the leading bidder, ahead of Gas Natural of Spain. It has cleared a number of legal hurdles in a bidding war that has lasted more than a year. Analysts said another bidder, Acciona, also of Spain, might revive its interest in Endesa as a result of Enel’s action.

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Bloomberg:

Mirant Corp. and Dynegy Inc. are among power producers that may lure private equity firms after Kohlberg Kravis Roberts & Co. agreed to acquire TXU Corp. in the biggest- ever leveraged buyout, Stephan Truffer of EIC Partners AG said.

Mirant and Reliant Energy Inc. have attractive valuations given the assumed TXU takeover price, Deutsche Bank AG analysts including John Kiani in Houston, wrote today in a note. Constellation Energy Group and Entergy Corp. have the “highest re-gearing potential,” or the greatest ability to absorb debt, UBS analyst Vincent Gilles said in an investor note.

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From one of the best blogs on the net, the Becker-Posner Blog:

Richard Posner:

The problem is that the market in fresh water is inefficient… a deeper problem is the institutional structure. One aspect is public ownership of water systems. There is no reason why a city should own the water company any more than it should own the cable television company. It is true that these are both networked services and therefore have aspects of natural monopoly; it would be wasteful to have multiple grids of water pipes in the same city. But through the contractual process a city can exploit “competition for the market”–that is, it can award a contract for the sale of water to whatever provider offers the best deal for the city’s residents.

Gary Becker:

Water is wasted in many ways by all sectors, and regulations do nothing to affect the main source of wasteful use of water: the inefficient pricing of water. Most irrigation systems in the world price water through annual flat fees, and not through charges that rise with the water consumed. Often domestic water use is not priced at all, and when priced, flat fees are far more common than fees that depend on use. As with any other scarce good, water is wasted when the cost of using more is negligible.

The obvious solution is to implement fees that rise with the amount of water demanded. Such fees are especially important in the agricultural sector since farming is a heavy consumer of water.

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AP via Washington Post:

DELTA, Pa. — A transformer at a nuclear plant caught fire Tuesday morning, but the smoky blaze was confined to the non-nuclear side of the plant, company officials said.

The fire, reported at 9:40 a.m., did not pose a threat to the public, said Craig Nesbit, a spokesman for Exelon Nuclear in Warrenville, Ill., which shares ownership of the Peach Bottom nuclear power plant with New Jersey-based PSE&G.

“The fire itself was very small,” Nesbit said. “It was mostly smoke.”

Power from one of the plant’s generating units was reduced following the fire, but it remained online, Nesbit said. Delta is in south-central Pennsylvania.

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MarketWatch:

TXU Corp.’s decision to whittle down plans to build 11 carbon-spewing, coal-fired power plants as part of its buyout deal with private-equity firms sent a chill Monday through both Wall Street and Washington, signaling that utilities can no longer afford to ignore climate change.

But with coal becoming too toxic to handle, nuclear plants taking too long to build and natural-gas prices going through the roof, little in the way of specifics is being offered on how utilities will provide clean and affordable power to an energy-hungry nation as more states push to deregulate their electrical grid and open it to the market’s machinations.

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BusinessWire:

United Water announced today that it has reached an agreement to acquire WP Water Company in Pennsylvania for $280,000. The transaction, subject to the approval of the Pennsylvania Public Utility Commission, is expected to close by the end of September.

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AP via Forbes:

Citizens Communications Co., which provides phone and Internet services in rural areas, said Tuesday its board authorized the repurchase of up to $250 million common shares over the next 12 months.

The new stock repurchase program could result in the repurchase of up to 5 percent of the company’s common stock.

Citizens also said it expects to spend between $270 million and $280 million in capital expenditures in 2007.

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The Wall Street Journal (subscription):

For years, cash-rich buyout firms have tried to break into the electricity business only to be rebuffed by wary regulators, consumer groups and environmentalists. Now, in what would be the biggest leveraged-buyout ever, an investor group is hoping it has cracked the code.

A total of six firms — led by Kohlberg, Kravis, Roberts & Co., Texas Pacific Group and Goldman Sachs Group — have signed a deal to buy utility powerhouse TXU Corp. for $32 billion plus more than $12 billion in TXU debt, according to people familiar with the matter. TXU directors last night voted to recommend that shareholders approve the deal.

In a creative twist, the firms have moved quickly to pre-empt opposition from powerful environmental groups while seeking support from various regulators and politicians. Already, the potential buyers have promised to cancel plans to build all but three of the company’s proposed 11 coal-fired plants. And they are planning to placate consumers with rate reductions.

The deal marks a quantum leap in the political sophistication of the buyout world, and may signal a broader remaking of private equity’s image in the utility industry. Buyout firms have generally received a chilly reception from utility regulators because they’re seen as temporary, profit-driven caretakers not answerable to public shareholders or sensitive to consumers. If the prospective TXU buyers can overcome that perception, they could potentially open the door for more private-equity investors.

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