Are utilities obsolete: a troubled system faces radical change

The once-placid electric utility industry has never seen anything like it. As the money tied up in unfinished nuclear power plants has mounted to alarming levels, banks have turned skittish and investors have fled, raising the threat of bankruptcy for some. But the web of troubles enveloping the utility industry reaches far beyond the nuclear basket cases and the hubbub over atomic power. More plant cancellations - coal as well as nuclear - less access to capital markets, and dwindling sympathy from regulators seem in the cards. Most disconcerting of all, the time-honored system of supplying, pricing, regulating, and financing electricity - a system that was not good enough to avert the present crisis - may be outmoded. If the industry cannot be kept viable, some foresee investor-owned utilities going the way of the private urban mass-transit systems, becoming municipal, state, or even federal entities. Defaults or bankruptcies could also lead to greater concentration, with the stronger utilities picking off the weak. Some analysts, in fact, believe that the main threat posed by the current crisis is that no utility, investor, or lender will be willing to risk money to build capacity required in the future - if only tomore » replace retiring plants. Without strong incentives - running counter to today's market forces - rescue mission is unlikely. The modest prospects for demand growth and the poor economics of new plants are relentlessly bringing the era of big central stations to an end.« less