Blame it on Enron Corp.’s collapse or commodity prices that have dropped from the heavens, but whatever the reason, utility executives are rethinking their once lofty notions of the merchant energy side of the business and instead have begun to turn more attention to their core generation businesses — a strategy change that has occurred in just one year.

Speaking at the 21st CERAWeek 2002 Executive Conference in Houston last week, panelists throughout the week have prefaced their presentations with a variety of statements that all scream the same basic message: “We’re Not Enron!” All have been quick to point out, however, that their companies are newly centered on cash flow, sustainable earnings and a more moderate growth rate.

So it was on Thursday as utility executives took the stage. Predicting slower growth than that forecast a year ago, many of the power brokers also noted that while gas-fired plants pique most development interest, coal-fired plants will continue to command a large share of capacity for the foreseeable future.

Robert Green, CEO of UtiliCorp United Inc., believes power companies will focus more on integrating their strategies to downplay the once high flying, but more risky, enterprises. As a “comfort to investors,” Green said UtiliCorp is “focused on a balanced integrated strategy,” which led to its decision to repurchase Aquila Inc., its marketing and trading business. Aquila had been spun off as a public company only last year, but Green said bringing the more risky business into the fold was proving less risky.

James Ferland, CEO of Public Service Enterprise Group Inc. said, “We are rethinking our view of the energy industry.” The Newark, NJ-based company’s rethinking includes a drastic re-forecast on earnings growth, down to 4-10% this year from earlier predictions of 15-20% a year ago. Public Service also has adopted “a robust strategy of diversification to make somewhat less critical the need to accurately anticipate specific future developments.”

Meanwhile, Linn Draper, CEO of American Electric Power Co. Inc., said AEP also has renewed its attention on more reliable patterns of steady growth and a solid balance sheet. He noted the “concern out there” that the merchant business was “too risky” and could detract from the utility side of the business in the short term.

The panelists, part of a Thursday morning plenary on electric power, agreed also that coal-powered generation is not a thing of the past.

“The expectation has been that natural gas will be the dominant fuel for generation,” said Anthony Earley, CEO of DTE Energy Co. of Detroit. “But the reality is coal will be the fuel of choice for electricity for a long time.” He noted that 50% of the megawatts generated in the U.S. today continues to be “fueled by coal.” He also warned that if gas-fueled generation continued to take “generation share” from coal, the natural gas infrastructure could be “severely challenged.”

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