Investors in California utilities, particularly PCG, have been thinking about wildfires a lot lately. People keep discussing the increase in fires over the last few decades, and that utilities could be at risk for some of the costs of the fires if their equipment is involved in the start of the fire, even if the equipment was maintained and operated in a manner that is considered best practice. A short article in Businessweek (see here) got me thinking that some changes are going to have to come to how wildfire liabilities are distributed, because things could get much worse. According to the article 10 million acres burned in the US in 2017, but this is far less than burned earlier this century. The chart in the article shows over 50 million acres burned each year in 1930 and 1931. (Note that the chart says that the reporting process wasn’t standardized until 1983, but even if the old numbers need some downward adjustment, those years are way higher than today.) It appears that the last half of the 20th century could be the outlier. With increased development throughout the west, there is no way a utility could pay for the potential damage caused by increased fires. We need utilities, and society will find to avoid their financial ruin from a threat that has a risk of getting worse in the future.
The latest issue of Barron's had an article discussing "Baby Bonds". These bonds typically have a $25 par value, and most trade just like stocks on the New York Stock Exchange. (See article here.) Two electric utility bonds were actually mentioned in the article, one by the Tennessee Valley AuthRead More
With the shale revolution, natural gas has become the biggest generating fuel for electricity in the US. This winter's high natural gas usage brought storage levels this winter to their lowest levels since the polar vortex winter of 2014. Since the end of winter, storage levels have increased, bRead More
This week I finished a review of GenOn's power plant fleet. All of their plants with over 200MW of capacity were reviewed. Click here for more information about ordering a copy of this report. The company has been in the bankruptcy process for over a year now. It is not clear when this caRead More
This weekend’s Barron’s had a large article on utility stocks and their current attractiveness. (see article here) A lot of the article discussed utilities and their relationship to bond yields. Yields have not moved up as much as investors expected over recent times, which has helped utiliRead More
After a great Super Bowl game my thoughts turn, of course, to what was happening with our infrastructure during the game. Last week ISO New England put out an article analyzing New England usage during last year's Super Bowl. (Article can be found here.) The article showed this nice chart showinRead More
The latest Barron's had an article on the utility sector, and the threat it faces from rising interest rates. (See article here.) The article included a chart showing the XLU's performance vs. the 10-year treasury for the last five years. I've expanded that chart to go back 15 years. Source: FaRead More