WASHINGTON, Sept. 14 /PRNewswire/ -- Most of America's leading power and
utility CEOs and CFOs think business will not change much over the next five
years. However, a study released today by Deloitte Research -- including
interviews with regulatory, financial, and policy experts -- shows significant
new challenges could be in store between now and 2010.
These are the highlights of the Deloitte Research report: Which Way to
Value? The U.S. Power and Utility Sector, 2005-2010.
In the report Deloitte Research groups the contrasting views on what the
next five years may hold into three broad scenarios: "Continuity," "Tough
Times," and "Rising Expectations." The "Continuity" scenario is based on the
majority view among industry executives.
"We believe that while minority views may represent less-likely scenarios,
they should not be ignored," says Greg Aliff, vice chairman and national
managing partner, energy and resources, Deloitte & Touche USA LLP. "The report
notes that when companies base their strategies on the conventional wisdom,
they may leave themselves vulnerable if the contrarians turn out to be
The study documents support for certain views that go against the
industry's prevailing assumptions. Some examples of cases where the majority
view deserves another look:
-- Climate change. Most executives interviewed believe the industry will
not face carbon limits within five years. But some executives
interviewed disagree, including CEOs of major utilities, and the
perception that new mandates could be in place before 2010 is shared by
some state regulators, environmentalists, and shareholder groups.
-- Rate regulation. Most of the executives interviewed believe state
regulators will support utility rate increases associated with new
facilities investments. But some executives interviewed think
commissions will be hard to convince, and that view is seconded by some
state regulators and financial players.
-- Back to basics. Most of the executives interviewed expect capital
markets to applaud the "back to basics" strategy of focusing on
reliable returns from the regulated core business. But some executives
interviewed think investors may soon demand more growth than the back-
to-basics model permits, and some in the financial sector concur.
-- Natural gas. Many executives interviewed predict gas will stay viable
as a generation fuel, with liquefied natural gas (LNG) from abroad
augmenting output from North American wells. Not so, according to other
executives interviewed, as well as some regulators, consumer advocates,
and national security analysts, who worry about problems such as
opposition to new LNG terminals and the emergence of a new "gas OPEC."
What will happen to U.S. utility companies if one of the minority views
turns out to be correct? By asking "what if?" and then acting on the insights
that result, executives can adapt and augment their current strategies in ways
that better prepare their companies for the opportunities and threats that may
The report discusses how power and utility companies can redefine their
strategies and potentially increase returns from assets, and grow their
companies through mergers and acquisitions, despite uncertainty over which
scenario the next five years will most closely resemble.
The study was conducted by Deloitte Research, part of Deloitte Services
LP. Using as a starting point the findings from a late-2004 survey conducted
by GF Energy, Deloitte Research interviewed 20 leading senior industry
executives as well as another 20 people with other perspectives, including
regulators, investment bankers, environmentalists, consumer advocates, and
think tank scholars.
Copies of the report may be obtained by sending an email request to
email@example.com. Please reference item number 5092.
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Deloitte & Touche USA LLP is the US member firm of Deloitte Touche
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SOURCE Deloitte & Touche USA LLP