Utilities on the brink: changing market realities threaten industry ruin; experts ask: is power business viable

Financiers and electric utility regulators agree that the utility industry is increasingly vulnerable to financial collapse, but they disagree over the cause and what to do about it. Utilities and their supporters blame inadequate rate relief, which reformers say the utilities failed to respond to by adjusting construction programs, for changing market realities. The warning signs causing this concern are high interest costs, the downgrading of utility bond ratings, falling profits, accounting gimmicks for construction funds, and lower stock prices. Utility efforts to secure federal help and promote more coal and nuclear plants in the name of energy independence will, if successful, change the framework of utility regulation as well as lead to unrestricted rate changes. Critics see the industry's consistent overestimation of demand as the basic problem, with shortfalls in sales intensifying insolvency. Amory Lovins recommends efficiency improvements as an alternative to new capacity. (DCK)