Emissions

Analyst argues that another layer of federal utility regulation is unnecessary

HAUPPAUGE, N.Y., Aug. 5, 2003 — A just released paper titled, “Ring-Fencing the Regulated Utility,” by senior Rudden analysts, indicates that, despite the financial disasters in the unregulated energy sector, regulated utilities in the U.S. have maintained reasonable levels of financial stability.

The paper observes that by and large, state regulators have, through existing state law, regulation, policy and practice, already ring-fenced the utilities from the unregulated operations. Further, although there have been one or two instances of management doing some very bad things, on an industry-wide basis there is absolutely no evidence of a systematic sacking and looting of regulated operations by non-regulated affiliates.

The paper further concludes that some of the ring-fencing amendments recently proposed to the Federal Power Act may, in fact, increase the uncertainty, risk and cost of capital associated with investing in the regulated utility sector, without providing incremental protection for the consumer.

As Richard J. Rudden, President and Founder of the Firm, stated, “The layering of yet another slice of legislation and regulation on an already-balkanized system of utility regulation can only lead to further confusion and, in the case of the proposed changes to the FPA, create new uncertainty regarding states vs. federal authority and jurisdiction. Further, why do this when the FERC has already, under its present mandate, indicated that it will increase its own level of due diligence on reviewing corporate restructurings, M&A activity and inter-affiliate transactions?”

The report can be obtained by e-mailing your request to [email protected]

R.J. Rudden Associates, Inc. is a strategic, economic and management consulting firm specializing in energy matters. Throughout its history, Rudden has assisted clients in such mission-critical areas as: economic and financial analysis; strategic, management and marketing services; industry restructuring support; litigation and regulatory support; technical analysis; and implementation support.

Serving more than 300 clients worldwide, Rudden’s energy industry professionals include experienced energy company senior executives, energy economists, senior policy experts and regulatory officials, engineers, renowned futurists, and internationally respected subject matter experts. Many are widely published and each is highly regarded for his or her unique insight and targeted approach to problem solving. Rudden’s clients encompass the full range of the energy value chain and cut across all market sectors, including energy producers, the financial community, the legal and regulatory community, new business ventures, and large energy consumers.