Electric utilities of 1979 and 1974: parallels and contrasts

In 1974, utility stock prices were approaching their 1974 bear market lows, and the immediate prospects for the industry were as bleak as they have been at any time during the last 40 years. Yet, rays of hope were present. The recent deterioration in utility financial conditions is not nearly as severe as that in 1974, but rays of hope are absent. The two time periods are compared in depth, and it seems likely that utility financial conditions will continue to deteriorate for some time now. An eventual reversal will occur when either (1) the deterioration goes far enough to produce a financial crisis, (2) the government's attitude toward the industry shifts favorably, or (3) inflation subsides and capital costs fall to a point where rate decisions of the temper regulators are now making will enable utilities to achieve satisfactory financial results. (MCW)