Financial health of the electric-utility sector: implications to national energy policy and the role of the oil backout bill
The current financial condition of the utility industry limits its access to reasonably priced capital. The following conclusions were obtained: (1) Utility earnings have dropped as a proportion of revenues, as fuel and fixed costs take up a growing share of the revenue dollar. (2) Spiralling construction costs and protracted lead times have tied up large sums of money in non-revenue producing assets. (3) As a result, coverage ratios and returns on equity have dropped. (4) The industry's weakened financial health is also reflected in the slow growth in cash earnings, versus the rapid increase in the cost of building plant. (5) Wall street has reacted to these developments by downgrading utility bond ratings, making debt financing more difficult. (6) The equity markets have also reacted to utility financial conditions, by driving the price of common stock well below book value. (7) Constraints on the ability to raise capital are all the more serious because of the industry's dependence on external capital to finance growth.
- Research Organization:
- Booz, Allen and Hamilton, Inc., Bethesda, MD (USA)
- DOE Contract Number:
- AC01-78PE70009
- OSTI ID:
- 6176090
- Report Number(s):
- DOE/PE/70009-T5; ON: DE83013099
- Country of Publication:
- United States
- Language:
- English
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COST
DATA
ECONOMIC GROWTH
ELECTRIC UTILITIES
ENERGY POLICY
FINANCIAL DATA
GOVERNMENT POLICIES
INFORMATION
NATIONAL ENERGY PLAN
PUBLIC UTILITIES