Re-Investment Brownout

Les Schaffer schaffer at
Sat Aug 16 17:19:31 MDT 2003

It's time for electric utilities to increase investment significantly
in generation, transmission and distribution facilities. The federal
government is showing signs of taking energy policy seriously. Many
states have awakened to the need to improve electric industry
infrastructure. Consumers are demanding an improvement.

But the electric supply situation will not materially improve unless
regulated electric utilities increase their capital investment in
their infrastructure. The truth is that utilities have pulled in their
horns. Investment in electrical transmission, for example, is half
what it was 10 years ago.


Utilities have no money to spend? Oh yes they do. Between 1999 and
2000 total utility revenues increased by 32 percent and earnings per
share increased 11 percent to $2.35. One good year? Utility average
return on equity is the highest it's been in 10 years. Utility
dividend yield is three times greater than S&P 500 average.

It is very easy to point the finger outside the utility industry and
blame others, chiefly government officials, for placing obstacles in
the way of investing in new and upgraded facilities. It is easy to
blame the lack of capital investment on the uncertainty caused by

In my opinion, a good share of the blame for the dangerously low
generating reserve margins currently plaguing the U.S., for the
inadequate transmission capacity, and for the reliability collapses of
our distribution systems lies with electric utility management and
their refusal to spend money on their own electrical systems.


The investment needed in new and upgraded transmission and
distribution facilities can only come from regulated utilities. There
are no independent power delivery companies to take up the
slack. There probably never will be. Even under the ISO structure the
owners of transmission assets and the parties responsible for capital
investment are electric utilities.

There's no avoiding this responsibility. The national spotlight is on
energy supply in general and electricity supply in particular.
Electric utilities must increase capital investment in electrical

Power Engineering July, 2001
Author(s) :   Robert Smock

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