Press Releases
R.J. Rudden Associates, a Black & Veatch Company, States that Utility Growth Strategies of the Past Create Opportunities for the Future
CONTACT: Steve Stolze 631 348 4090 Ext 204
Hauppauge, New York … March 29, 2005 … In a report titled, “Energy Companies Head Back to the Future,” senior Rudden analysts put the recent past behind and look at strategies and options for growth. The report reviews recent performance of Regulated Local, Regulated Regional and Diversified Regulated utility sectors versus Diversified Competitive and Competitive Merchant sectors. It summarizes future energy price outlooks, and compares the revenue potential of natural gas-fired generation versus coal and nuclear. The paper also reviews back-to-basics, rate base and competitive growth strategies for utilities and examines the future viability of the independent power producer business model.
“Although there were far fewer downgrades in 2004 and stock values are up, the downturn in the sector cannot be considered over because a number of high-profile energy concerns continue to be rated below investment grade,” states Stephen A. Stolze, Director at Rudden. “The cause and effect of such rating activity has resulted in very conservative growth strategies for most of the industry. It would seem as though the phrase “Back-to-Basics” had been redefined to mean the only viable strategy available for an energy utility. This, of course, is not true,” he continued.
* * * *
About Black & Veatch
Black & Veatch Corporation is a leading global engineering, consulting and construction company specializing in infrastructure development in the fields of energy, water and information. Founded in 1915, Black & Veatch serves its clients with conceptual and preliminary engineering services, engineering design, procurement, construction, financial management, asset management, information technology, environmental, security design and consulting, and management consulting services. The employee-owned company has more than 90 offices worldwide. Black & Veatch is ranked on the Forbes “500 Largest Private Companies in the U.S.” listing for 2004. The company’s Web site address is www.bv.comAbout R.J. Rudden Associates
R.J. Rudden Associates, a unit of Enterprise Management Solutions - Black & Veatch Corporation, is among the world's premier strategic, economic and management consulting firms specializing in energy, water, information and government matters. We encourage our professionals to publish individual commentary on key industry issues. The opinions offered are those of the authors and not official viewpoints of the company or its other employees. Additional information is available on Rudden's web site at www.rjrudden.com
BLACK & VEATCH ACQUIRES R.J. RUDDEN ASSOCIATES, INC. AND LUKENS ENERGY GROUP, INC.
CONTACT: Neal Thurman 913-458-9312
Overland Park, Kan. (Jan. 14, 2005) - Black & Veatch Corporation announced today that it has completed the acquisition of R.J. Rudden Associates, Inc. (Rudden) located in Hauppauge, New York, a premier strategic, economic and management consulting company specializing in the energy and utility industries, and Lukens Energy Group, Inc. (Lukens) located in Houston, Texas, a preeminent management consulting group serving senior management in the oil and gas industry in strategy, risk mitigation, valuation and regulatory matters.
Black & Veatch’s strategy in acquiring Rudden and Lukens is to expand and strengthen its ability to provide financial and business solutions to its clients in the energy and water industries. The Rudden and Lukens organizations will be integrated into Black & Veatch’s Enterprise Management Solutions organization, which was formerly known as Enterprise Consulting.
“These acquisitions demonstrate Black & Veatch’s commitment to building our Enterprise Management Solutions organization” said Len Rodman, Chairman, President, and CEO of Black & Veatch. “They fit our investment profile, offering professionals with industry-leading skill sets, blue-chip clients and reputations for a strong commitment to client service,” said Rodman. “We are excited about the future of the Rudden and Lukens organizations at Black & Veatch. We look forward to developing natural synergies between our companies.”
“For decades, Black & Veatch has delivered customized advisory solutions to both the energy and water sectors,” said Rodger Smith, President of Black & Veatch’s Enterprise Management Solutions organization. “The acquisition of Rudden and Lukens broadens and deepens our capabilities, particularly in the energy markets, enabling us to expand the use of our resources across clients’ value chains.”
As Black & Veatch companies, the Rudden and Lukens organizations will remain focused on providing our clients management solutions, based on industry expertise, strong implementation capabilities and mission-critical knowledge. At the same time, Rudden’s and Lukens’ consultants will be able to draw on Black & Veatch’s extensive resources to provide expanded strategy, process and technology solutions.
Rudden’s professionals include experienced energy industry executives, energy economists, senior policy experts and regulatory officials, and internationally respected strategists. They are widely published and are highly regarded for their depth of experience and targeted approach to problem solving.
Lukens professionals also include experienced energy industry executives. They have a track record of successfully providing management consulting solutions to the energy industry. “The company’s professionals have significant experience in the practical issues of strategy implementation along with the tools that provide support for strategy implementation,” Smith said.
Black & Veatch has assembled an operations team to assist in the transition. “We understand that client relationships and people are among the most important assets of any company. We have developed a plan to ensure a seamless transition for Rudden’s and Lukens’ clients and professionals,” Smith said.
Edwin P. Anderson
Joins R.J. Rudden Associates, Inc.CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... August 3, 2004 ... R.J. Rudden Associates, Inc. (Rudden) announced today that Edwin P. Anderson has joined the firm as a Vice President in the Natural Gas group. Prior to joining Rudden, Mr. Anderson held senior-level positions at KeySpan Energy. As Director of Strategic Support, he had managed the long- and short-term energy asset planning, acquisition, contract administration and back-office activities of the gas supply portfolios for both KeySpan Energy Delivery New York (Brooklyn Union Gas Company) and KeySpan Energy Delivery Long Island (Long Island Lighting Company).
Mr. Anderson has extensive background in gas utility strategic long- and short-range energy asset planning and procurement; LNG planning and utilization; market, regulatory and policy research for third-party LNG developers; natural gas supply operations and management; gas utility distribution operations and management, including pipeline construction, operations and utility engineering; as well as gas utility and interstate pipeline regulation. He also has a solid background in marketing and sales management, reengineering business processes, contract negotiations, merger and acquisition analysis and merger team leadership. Mr. Anderson has also prepared rate case testimonies, testified and presented at regulatory proceedings. He has managed departments as well as cross-functional teams responsible for strategic as well as operational issue resolution.
“We are very excited to have Ed join the firm,” stated Richard Rudden, President and CEO of Rudden. “Ed’s broad experience and a proven track record in the natural gas and energy industry will add significant value to our Natural Gas group,” Mr. Rudden continued. Mr. Anderson stated, “I have been familiar with the breath and width of the services offered by the Rudden organization to the energy industry for many years. And, I am proud to now be an integral member of the Rudden team and contributing to its efforts to satisfy the diverse needs of its energy clients.”
Mr. Anderson received a Bachelor of Engineering degree in Mechanical Engineering from the City College of New York and a Masters of Business Administration from Adelphi University. He is a frequent presenter at industry conferences on issues facing the energy industry. Mr. Anderson can be contacted at our Hauppauge, New York office at 631.348.4090 ext: 223 or via e-mail at eanderson@rjrudden.com.
Press Releases
Rudden Sees Growing Trend in Distribution Reliability Risks Teams With Harbourfront Consulting to Assist Utilities
CONTACT: Richard J. Rudden 631.348.4090, ext: 205
Hauppauge, New York … February 4, 2004 … R.J. Rudden Associates, Inc. (Rudden) has announced a new, joint consulting offering with Harbourfront Consulting Group, LLC that will assist electric utilities in addressing the growing need for independent, expert assistance in the areas of distribution reliability risk assessment, planning and regulatory support.
“We have seen a rapid increase in the number of regulatory proceedings and investigations regarding the adequacy of utility reliability planning, prudence, and measurement, as well as reliability-related performance rewards and penalties,” according to Mr. Richard J. Rudden, CEO and founder of Rudden. “We had observed the beginning of this trend more than three years ago, but it has accelerated tremendously since the August 14th blackout.”
“Too often, regulatory decisions regarding reliability and related cost recovery are made on the basis of inadequate and misunderstood data, or because of the lack of a well-articulated, persuasive case, sometimes unsupported by solid empirical analyses. The alliance between Rudden and Harbourfront makes available more than a dozen senior professionals with regulatory, distribution engineering, statistical, econometric, accounting, financial, audit and related forensic experience.”
According to Mr. Fitzpatrick, CEO of Harbourfront, “Many of our clients faced a similar situation with the nuclear investment prudency dockets in the late 1970’s and 1980’s. Utilities were held to cost comparison standards and performance benchmarks that were frequently set by Commissions without the benefit of objective benchmarks and expert analytics. Today, distribution utilities are faced with the potential of being placed in the same regulatory quandary unless they objectively evaluate their existing performance metrics and place them in a framework that allows for credible presentation. Ultimately, the setting of unbiased standards that are properly designed to avoid the possibility that good performance today will lead to more stringent regulatory hurdles tomorrow will be essential.”
Additional information on the Rudden-Harbourfront service offering may be obtained by calling Richard Rudden at the number above, or e-mailing him at rrudden@rjrudden.com
R.J. Rudden Associates, Inc:
Are Bigger T&D Electric Utilities More Efficient?CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... September 16, 2003 ... An R.J. Rudden Associates, Inc. (Rudden) study entitled, “T&D Economies of Scale and the Mysteriously Fitted Curve: A First Cut at Whether There Are Any,” examines the transmission and distribution operations of more than 100 utilities in 1996 and 2002. The author, Leonard S. Hyman, senior associate consultant at Rudden, observed that, “the most inefficient companies were among the smallest, and the largest companies tend to be efficient. But, far more efficient companies were of small to medium size. In other words ... scale may help ... but good management ... or sheer luck helps even more.”
These observations led to the following conclusions:
1) Size matters, but only up to a point.
2) Small scale rather than large scale mergers may produce the best payoff.
3) Small to medium size companies with the right characteristics can survive and thrive.
4) Smaller companies may have to address Wall Street’s indifference to smaller firms. Just having competitive operating ratios won’t bring in the money
Energy Market Volatility and Unpredictability Elevates the Need for Strategic Planning and Strategic Clarity!
CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... September 2, 2003 ... In a newly released paper titled, “Strategic Clarity - A Key to Energy Company Revival,” Mr. Michael Mount, a Rudden Vice President, states, “Volatility and unpredictability do not eliminate the need for strategic planning or strategic clarity. As the future becomes more ambiguous, the need for effective strategies increases.”
“The art of strategy comes from selecting the limited portfolio of businesses that offer a reasonably stable base, includes growth opportunities and, yet, contains only companies that customers and investors believe have the capability to operate well ... leadership often gets lost in translating ideas into strategies. Growth is not a strategy, acquisition is not a strategy, cost cutting is not a strategy, and not changing is not a strategy. Strategic planning encompasses a continual process of analysis, creation, execution and measurement,” states Mr. Mount.
The paper discusses how the nature of the strategic planning process changes during turbulent times. Mr. Mount highlights Alignment and Organizational Culture as critical to successful strategic plan implementation and successful organizations. It also discusses the use of the Balanced Scorecard as an effective framework for strategic plan execution. The complete paper can be obtained by e-mailing your request to dtabacco@rjrudden.com
R.J. Rudden Associates, Inc.:
Cost of Transmission Infrastructure Fix in Range of $1.2 to $2.0 Billion Annually ...Cost to Average Resident No More Than About $50-$125 Over Five YearsCONTACT: Richard J. Rudden 631.348.4090, ext: 205
Hauppauge, New York ... August 19, 2003 ... According to a paper just released entitled, “The Shock Heard ‘Round the World or ... the August 14th Birth of the United Grid of America,” by R.J. Rudden Associates, Inc. (“Rudden” or the “Company”), the annual, nationwide cost to utility customers of upgrading and modernizing the nation’s transmission grid could increase in each of the next five years by about $1.2 to $2.0 billion, but cost the average residential customer no more than between $50 and $125 over five years.
This would mean a rate increase of no more than one-half of one percent to just less than one percent in each of the next five years. According to Mr. Richard Rudden, Founder and CEO of Rudden, “Despite the concerns of members of Congress and the Administration, it seems to us that fixing the problem should not be all that expensive, relatively speaking. Further, financing the effort would be manageable, given the sheer size of the industry and its demonstrated ability in the past to manage capital growth well in excess of the amounts now needed for transmission. The real challenge will be overcoming regional parochialism.”
A “typical customer” who uses 860 kWh a month and pays the national average cost of 8.6 cents per kWh could see its monthly bill increase by between 38 cents and 63 cents in the first year of the hypothetical transmission build-out, and reach a level that is, at most, between $1.50 and $3.00 per bill per month higher than today’s rates. Mr. Rudden stated, “By the end of the fifth year, this typical customer will have paid a total cost that is in the order of $50 to $125 dollars to fund the upgrade of the transmission system. This is comparable to the cost of a refrigerator’s or freezer’s worth of spoiled food, a month’s worth of gasoline, or a not-even-so-great night on the town.” The report further indicates that these are likely to be the maximum costs incurred by residents, and could be reduced significantly through regulatory commission policies on rate design and tax incentives.
“Of course, given the very recent nature of the power failure, these numbers are only early approximations based on previous work that we had done, more recent anecdotal information, and our professional judgment,” stated Mr. Rudden. “However, as preliminary as it is, we feel that our study will provide useful information for the public debate on the future of the nation’s transmission grid. Most of all, while the total absolute dollars of investment necessary to bring the grid up to 21st Century standards is very high ... perhaps in the order of between $30 billion and $50 billion on the outside ... the impact that we have estimated on customer bills seems manageable, and less than implied by many in the industry. With any sort of significant sharing of the national tab with commercial and industrial customers, or with energy marketers and generators, or through special infrastructure development tax incentives, the impact on residences would be lower than we have estimated.”
The report also compares the cost of infrastructure development with the potential benefits of improved system reliability. Some estimates of the economic costs of the August 14th Blackout range between $30 billion to $60 billion, while others are considerably less ... perhaps in the $5 to $10 billion range ... but still very large. In addition to the direct and consequential economic costs of the blackout, Rudden also identifies other studies that support “value of reliability” ranges between $40 billion to $400 billion per year. “Considering that the benefit to cost ratio is so high, and that the impact on residences is no more than between $50 to $125 in total over the next five years, the investment is well-justified,” claimed Mr. Rudden.
Mr. Rudden continued, “Through this paper, we are trying to place reasonable boundaries around the potential impacts on customers, and not to provide high degrees of precision, at least at this point. Also, our report illuminates that fact that financing the necessary infrastructure projects should not be a major challenge, provided the FERC, Congress and the states can provide real leadership, develop clear ground rules, and assure the capital markets that they will provide the necessary financial incentives. Our study assumptions include a generous allowance for appropriately high levels of equity returns and higher than average depreciation rates to ensure capital attraction, and provide incentives for technological and organizational innovation. Even with that high cost of capital assumption, the overall increase in rates is not beyond the capability of customers and the economy to finance what needs to be done. It’s time to stop being penny-wise and pound-foolish.”
R.J. Rudden Associates, Inc. States That
One of the Most Overlooked and Politically-Sensitive Issues in the Regulation of Utility Rates is the Risk Imposed on Utilities by Their RegulatorsCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... July 29, 2003 ... In a newly released white paper titled, “The Hidden Risks of Regulation and Their Effects on Utility Returns,” Dr. H. Edwin Overcast, Ph.D., a Rudden Vice President and economist, states, “The acknowledgement, more explicit identification, and quantification of regulatory risks in the risk premiums, as developed in utility cost-of-capital studies, by virtue of their impact on the actual returns to shareholders, would almost certainly require that returns increase.”
“The reason these risks are hidden is that the common methods for estimating required returns employ data for comparable companies. Comparability determinations, for the most part, fail to look beyond various financial indicators. Some of these financial indicators come from Wall Street analysts who focus attention on financial issues without a comprehensive understanding of the role that regulation plays in determining financial results. While analysts discuss issues such as future test years, they seldom explore the factual circumstances of test year determination. Similarly, the level of detail required to research the hidden risks of tariff issues, growth policies and the like, cause the market analysts to treat utilities as comparable when they indeed are not,” Dr. Overcast states.
The paper discusses overlooked risk elements that impact the results reached through the regulatory process. It is not about the alphabet soup - English or Greek - that is the domain of expert witnesses. There is no discussion of DCF, CAPM, CE, or risk premium. There is no discussion of beta, alpha or any other of the myriad of terms used to develop equity cost estimates. Rather, the focus looks at elements of the regulatory process that impact the actual earned return on equity for the first year of effective rates. The complete paper can be obtained by e-mailing your request to dtabacco@rjrudden.com
R.J. Rudden Associates, Inc:
Regulators Predicted Today’s
Energy Company BankruptciesCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... March 25, 2003 ... While the recent spate of energy company bankruptcies and threatened bankruptcy filings seem to have taken the industry by surprise, regulators predicted the trend a decade ago.
In the years 1993 through 1995, R.J. Rudden Associates, Inc. conducted a series of surveys of state regulatory commissions on their attitudes and opinions towards the then impending restructuring of the energy industry. Regulators first expressed their fear of the potential for bankruptcies in 1993, when about a third of the respondents stated there would be an increased risk as a result of deregulation. As the patterns of restructuring better defined themselves in the subsequent years, by 1995, fully 62% of the regulators shared this concern.
An analysis of other components of the survey also shows that regulators clearly saw the beginnings of what the public has only relatively recently come to know as the industry’s higher-risk profile. In the years during which the surveys were conducted, nearly 60% of the respondents saw decreasing debt service coverage as a consequential risk of deregulation. Almost all respondents (90%) expected utility costs of capital to increase, primarily reflecting the higher-risk premiums created by a competitive marketplace. About 70% felt that the rates of return actually realized by utilities would decrease.
“While regulation has not always been perfect,” stated Richard J. Rudden, CEO of R.J. Rudden Associates, Inc., “it certainly appears that the regulators got the issue of increasing financial risk right. Ironically, and somewhat oxymoronically, 85% of the respondents also believed that deregulation would require increased levels of regulatory vigilance. Enron could have used some of that.”
Copies of the surveys are available in for a small fee for processing and handling. Please direct your request via e-mail to dtabacco@rjrudden.com.
R.J. Rudden Associates, Inc.:
Electric Utility Sector - Big Gap In Infrastructure InvestmentCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... March 11, 2003 ... R.J. Rudden Associates, Inc. (Rudden) today released a report titled, “The Next Big Crunch: T&D Capital Expenditures,” describing an alarming pattern regarding the lack of spending in electric transmission and distribution infrastructure. The author, Leonard S. Hyman, a Senior Associate at Rudden, is predicting future deterioration in electric system reliability if appropriate regulatory incentives are not provided and inadequate spending on infrastructure continues. Mr. Hyman attributes the sector’s lack of activity in capital system improvements to a number of causes and describes the gap as “too large to ignore.”
Citing past industry standards, Mr. Hyman states that electric utilities and transmission owners should spend about $63 billion for distribution improvements, and about $25 billion for transmission improvements, in the 2001-2005 period. However, in 2001, utilities spent only $8.5 billion on distribution and $3.7 billion on transmission, leaving balances of $54.5 billion and $21.3 billion, respectively, for 2002-2005. That averages out to $13.6 billion per year for distribution and $5.3 billion per year for transmission. Leonard asks, “Has the industry become astoundingly more efficient in managing its capital expenditures or should we expect the spending plans to rise dramatically?”
The report postulates that deregulated activities diverted money away from investing money on system improvement and replacement, in favor of steering funds toward deregulated activities with the potential promise of a higher return than regulated assets could earn. Regulators, inadvertently, encouraged the same pattern when they implemented price caps as part of bargains that liberated generating assets from regulation. Now the bill is coming due.
R.J. Rudden Associates, Inc.:
Leonard S. Hyman, Appointed Editor Of
“Rudden Energy Strategies”CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... February 26, 2003 ... As part of its continuing efforts to provide investors in the energy industry, at large, with truly independent strategic research and analysis, Leonard S. Hyman has been appointed Editor of Rudden Energy Strategies, a new monthly newsletter published by R.J. Rudden Associates, Inc. (Rudden). The new publication focuses exclusively on the energy and utility sector.
“Don’t recommend any stock that I can’t explain to my mother,” Mr. Hyman, Senior Associate of Rudden, states that this was the simple rule that guided him at the start of his career writing strategic reports for clients of a major investment bank. “I tried to adhere to keep it simple and make recommendations for those millions of investors who liked to buy safe stocks. Companies who paid their bills in hard currency.” With this charge, Mr. Hyman was naturally drawn to the energy and public utility sector and has stayed there for more than 30 years.
“Bad timing, the energy market went wild then went up in flames,” according to Mr. Hyman, describing his “keep it simple” strategy. Global expansion had begun, companies raced each other to do the big deal, and markets favored 20 percent or higher growth rates per year, verses 6 percent. “Everyone expected to get rich, despite increasing competition and consumers would benefit as well. Nobody could lose in that environment.” As experience now demonstrates, when nobody can lose, everyone can lose.
Mr. Hyman’s laugh-out-loud funny, unique insights appear in the inaugural issue of Rudden’s new monthly newsletter entitled “Rudden Energy Strategies.”
“We are very fortunate to have Leonard enhance our intellectual capital with his keen insight, exceptional talent and wonderful sense of humor,” according to Richard J. Rudden, the firm’s CEO. He added, “In this market, Leonard will not only provide his invaluable insights, but he will also help us and our clients lighten up a bit!”
The inaugural issue will be distributed on March 3rd. To be added to our electronic distribution list, please send an e-mail, with your name and phone number, to jstarbird@rjrudden.com
R.J. Rudden Associates, Inc:
Collapse of Energy Titans
Challenges Natural Gas Supply MarketsCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... February 26, 2003 ... R.J. Rudden Associates, Inc. announced the results of a recent survey in which natural gas industry participants defined a number of potentially adverse, but manageable, impacts resulting from the utter collapse of energy companies that once were regarded as the “Titans Of Energy.” Rudden undertook the survey to aid the industry in better understanding the scope of the natural gas supply challenges facing it in this new market. The survey results were complemented with telephone interviews.
The competitive natural gas markets that have evolved over two decades of deregulation have proven remarkably adaptive and resilient to market stresses. The past two years are no exception. With the exit of the once ubiquitous mega-marketers (e.g., Enron, et al.), the basic composition and structure of the wholesale natural gas market has changed dramatically, and cracks in the industry foundation have become evident. However, the survey respondents on the whole are cautiously optimistic that the industry will ultimately deal effectively with the challenges presented.
For a number of years, local natural gas distribution companies (LDCs) have relied on the expertise of third-party marketers to help offset risk and manage gas supply portfolios more efficiently than the LDC could do alone. The marketers provided a wide range of gas supply planning, transportation and acquisition services for the LDCs. In addition, they provided many financial risk management products and services. Rudden endeavored to determine if, and to what extent, there has been decline in the use or availability of third-party services and products, as a result of the demise of the mega-marketers, or if there has been a decline in perceived reliability.
The results from the survey and telephone calls are:
1) Overall, adverse effects on gas supply reliability were not a concern to almost two-thirds of the respondents. However, it was a concern of 27% of the respondents. While 27% is not high, per se, this statistic suggests that a significant degree of pessimism remains in an industry that has always had an excellent record of reliable transportation, distribution and delivery service.
2) One of the greatest concerns is that the reduction in the number of third-party entities and the confusion in the market has resulted, and will continue to result, in adverse effects on market liquidity and price volatility, as well as increases in corporate financial risk (although to a somewhat lesser degree).
3) Significantly fewer LDCs are using third-party services today than previously. In 2000 and 2001, approximately 55% of the respondents used third parties either “substantially” or “somewhat.” By the end of 2002, however, only 40% used outside services.
4) Nearly 73% of the gas supply personnel surveyed felt that the current state of the marketing and trading sector of the gas industry will require them to spend considerably more time in the management of gas supply acquisition.
5) New players are stepping in to markets abandoned by the mega-marketers. However, slightly more than half of the respondents believed that these new players would not be effective until after 2003, and 9% believed that the new players wouldn’t be effective until after 2004.Also respondents elaborated on specific functions third parties currently utilized to perform future pipeline capacity plans and where the demise impacts the industry the most. The entire results of the survey will be published in the upcoming March 2003 issue of Natural Gas Magazine.
R.J. Rudden Associates, Inc.
Announces Survey of Natural Gas Industry ProfessionalsCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... January 7, 2003 ... R.J. Rudden Associates, Inc. is inviting natural gas and energy industry professionals to participate in a survey that seeks to collect and measure the impact of the demise of the “Mega-Marketers” on the natural gas supply industry.
Recent developments in the energy sector have resulted in the curtailment or abandonment of business by many previously large and ubiquitous energy marketers, risk managers and other third-party intermediaries. The list is large and includes Enron, but also Aquila, Dynegy, and others.
These third-party “Mega Marketers” provided a wide range of critical gas supply planning, transportation, and acquisition services to local natural gas distribution companies ("LDCs”), including not only arranging physical supply and related logistics, but also financial risk management services and products. With the current state of the marketing and trading sectors of the natural gas industry, a series of critical questions arise: Who will provide these services and products in the future? How will the risks associated with the acquisition of gas supply be managed? What are the implications for LDC organizational structure and staffing, gas supply and administrative costs, and financial and regulatory risks?
Rudden is currently undertaking research that will aid the natural gas industry in better understanding the scope of the gas supply challenges facing it. This questionnaire is one element of that research. All respondents will receive a copy of the results, which we expect to be compiled by mid to late January 2003.
R.J. Rudden Associates, Inc:
Richard J. Rudden Elected to the Board of Directors of the North American Energy Standards BoardCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... December 11, 2002 ... R.J. Rudden Associates, Inc. announced today that Richard J. Rudden, Founder and CEO of the Company, has been elected to the Board of Directors of the North American Energy Standards Board (NAESB). He will represent the natural gas retail quadrant of the NAESB.
“The work that the NAESB does is critical to the development of transparent and liquid energy markets. This, of course, means that the NAESB is critical to our Company’s energy client interests,” said Mr. Rudden. “Effective open access and choice, lower long-term energy prices, and the commercial development of new energy technologies, are all greatly dependent on clear and uniform codes and standards. It is only through the collaborative and technically competent efforts of organizations like the NAESB, NERC and the Regional Transmission Organizations that we can hope to achieve market efficiency.”
Most of R.J. Rudden Associates, Inc.’s clients are engaged in one or a combination of all four quadrants of the NAESB: the electric wholesale and retail quadrants, as well as the wholesale and retail gas quadrants. “By actively serving on the Board of Directors, we hope that the firm will be better positioned to assist the industry in finding its way through the very technically complex maze of energy standards, and enable us to bring new, state-of-the-art perspectives to our clients.”
Distress In the Energy Sector:
39 Companies Must Refinance $71 Billion in Short-Term Debt Excluding Enron!.CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
New York, NY ... November 20, 2002 ... R.J. Rudden Financial, LLC (Rudden) has announced the formation of an “Energy Workout Group” aimed at addressing the industry-specific financial, economic, technical, legal and regulatory issues created by the most recent credit crisis in the electric power sector. The company estimates that 39 energy companies will need to refinance $71 billion of short-term debt, and of even greater statistical significance is the fact that the list of impacted companies does not include Enron.
“The industry has been paralyzed by a series of ratings downgrades, coupled with a loss of confidence in the sector that has driven stock prices to levels that are near and sometimes well below book value. Since the collapse of Enron, the downgrade to upgrade ratio for energy companies is 13:1 versus 3:1 for the three years prior. We think the failure of the asset sale strategy will force a major restructuring for company balance sheets with much of the burden falling on lenders,” states Stephen A. Stolze, Managing Director at Rudden. “Current debt structures in the industry are financially and legally complicated. Where corporate-level debt supports both regulated and non-regulated utility operations, the issues become vastly more complex. In a work out, understanding the asset values that support both project and corporate utility debt requires sharper asset-specific revenue projections, a thorough comprehension of regulatory practices and policies, and an intimate knowledge of the unique market characteristics and forward price curves associated with a rapidly changing and uncertain commercial environment,” Mr. Stolze continued. “Resolution of these issues will demand a high level of financial expertise, industry-specific economics expertise, technical expertise, and extensive legal and regulatory expertise. The Group we have assembled is unsurpassed in these regards.”
“While the credit outlook is certainly not good for the industry, the present environment also affords an opportunity for creative, proactive solutions, and possibly even a chance to re-shape the industry,” said Mr. Richard J. Rudden, founder of the Rudden family of companies, which includes both R.J. Rudden Financial, LLC, and R.J. Rudden Associates, Inc. “Managements that are prepared to work constructively and realistically with creditors … and vice versa … can resolve what might otherwise appear to be intractable challenges. Through the Rudden Energy Workout Group, we couple our integrity, deep industry expertise, and due diligence experience with our partners’ 25-year track record of successful financial work outs. People who know our style also know that we work diligently with all stakeholders to achieve mutual success.”
Mr. Stolze recently authored a paper titled, “Financial Distress in the Electric Power Markets … It’s About to Get Worse,” published in Rudden Financial’s Energy Capital Markets Report. The paper examines the current crisis in detail, and takes the position that the industry is facing a wider impact on companies than might be obvious. Causes, market price trends, additional cash needs and potential options for solutions are discussed.
The complete paper can be obtained by e-mailing your request to dtabacco@rjrudden.com or it can be accessed from Rudden’s web site at www.rjrudden.com. From this home page click on “Profiles” then click on “Papers,” after filling out a brief registration.
Leonard Hyman Affiliates With
R.J. Rudden Associates, Inc.CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... September 5, 2002 ... R.J. Rudden Associates, Inc. (Rudden) announced today that Leonard S. Hyman has become affiliated with the firm as a Senior Associate Consultant. Mr. Hyman is an international energy industry strategist, well known in the energy and financial services sectors for the many books and articles that he has published on energy, water and telecommunications, for his involvement in utility restructurings, financings and privatizations, and for his highly expert, in-depth utility industry research analysis. For more than ten years, Mr. Hyman was selected by Institutional Investor magazine as one of the industry’s leading research analysts.
“We are extremely pleased that Leonard has joined us. He will add tremendous breadth and depth to our firm’s strategic consulting practice, to which he will bring his knowledge in international energy economics and finance, regulatory policy, industry restructuring, privatization, and market liberalization,” said Richard J. Rudden, President and CEO of Rudden. “Our firm’s strategic energy consulting practice has expanded substantially in recent years, and Leonard will add further depth and quality to the full range of our services, as well as new momentum to our growth. We look forward to Leonard’s participation in our continuing leadership role in the industry.”
Mr. Hyman added, “I am looking forward to working with Rich Rudden and the Rudden team. Nowadays, to get it right, you need engineers, economists, lawyers, accountants, executives and marketers working together, and Rich has that kind of team.”
In addition to his consulting association with Rudden, Mr. Hyman serves as a Senior Industry Advisor to Salomon Smith Barney’s Global Power Group, and is on the advisory boards of Enertech Capital, Excelergy, and the International Foundation for Research in Experimental Economics. Previously, he was head of the Utility Research Group and First Vice President at Merrill Lynch. While there, he was also a member of the privatization teams for offerings of British, Spanish, Mexican, Argentine and Brazilian utilities. He has worked extensively on the creation and financing of independent transmission companies, testified before Congress, was a member of four advisory panels for the U.S. Congress Office of Technology Assessment, was on the advisory board of EPRI, and was a member of Blue Ribbon Task Force advising on the reorganization of the North American Electric Reliability Council.
Mr. Hyman is co-author of “America’s Electric Utilities: Past, Present and Future, Unlocking the Benefits of Restructuring: A Blueprint for Transmission,” and editor of “The Privatization of Public Utilities.” He is a Chartered Financial Analyst, and holds a B.A. degree from New York University, and an M.A. in economics from Cornell University.
* * * *
R.J. Rudden Associates, Inc. is among the world’s premier strategic, economic and management consulting firms specializing in energy matters. Throughout its history, Rudden has assisted clients in such mission-critical areas as: economic and financial analysis; strategic, management and marketing services; industry restructuring support; litigation and regulatory support; technical analysis; and implementation support.
Serving more than 300 clients worldwide, Rudden’s energy industry professionals include experienced energy company senior executives, energy economists, senior policy experts and regulatory officials, engineers, renowned futurists, and internationally respected subject matter experts. Many are widely published and each is highly regarded for his or her unique insight and targeted approach to problem solving. Rudden’s clients encompass the full range of the energy value chain and cut across all market sectors, including energy producers, the financial community, the legal and regulatory community, new business ventures, and large energy consumers.
Rudden has offices in New York, Washington DC, Houston and San Francisco. Additional information about the firm is available on Rudden’s web site at www.rjrudden.com.
R.J. Rudden Associates, Inc.
Identifies Ten Critical Business Impacts
Created by the Proposed Standard Market DesignCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... August 14, 2002 ... R.J. Rudden Associates, Inc. (Rudden) today released an article titled, Ten Critical Business Impacts Created by the Proposed Standard Market Design. Rudden’s energy industry restructuring clients include all categories of market participants including financial institutions, transmission asset owners, grid operators, generators, and marketers working in the developing markets throughout North America and internationally. The critical business impacts identified include:
1. The Giga-NOPR raises the real and implicit costs of transmission ownership for an integrated entity by stipulating a high standard of independence.
2. The underlying fundamentals of transmission pricing have changed to reflect the cost of congestion, not just the cost of service.
3. The use of LMP and the establishment of day-ahead and real-time markets will create economic signals that can be considered in the regional planning process.
4. Congestion Revenue Rights (CRRs) will be used to financially hedge against congestion costs - replacing firm transmission rights.
5. Regional planning and a 12 percent minimum capacity reserve create opportunities for market participants.
6. Demand-side market participation will help mitigate supply shortages and may be valued using the cost of congestion as a credit.
7. Market participants will be held accountable for abuses of market power.
8. Barriers to implementation caused by software complications will be minimized.
9. Physical and cyber security will be emphasized and monitored.
10. States will play an active role in market development.According to Stephen A. Stolze, Managing Director of Rudden, “The Federal Energy Regulatory Commission’s (FERC) July 31st Notice of Proposed Rulemaking (Giga-NOPR) defining the Standard Market Design (SMD) is a bold step forward that seeks to strike a fair balance among all stakeholders. Simultaneously, it creates significant changes to the transmission and wholesale electricity markets that will have critical business impacts on all categories of participants. After reviewing the various elements of FERC's comprehensive proposal, it becomes apparent that FERC’s directives are based upon a foundation of best practices as developed and, in some respects, proven by a wide variety of participants in the currently functioning markets of PJM and NYISO. At the same time, FERC has provided the flexibilities needed for these practices to succeed in other regions of the country where the pace of restructuring may be slower, the nature of transmission asset investment, or the mix of generation resources may be significantly different than in the Northeast and Mid-Atlantic states.”
Rudden Vice President, Howard S. Gorman, added, “While FERC’s Giga-NOPR is still a work-in-progress, with important details still to be defined, it advances toward adding clarity and direction to some of the regulatory uncertainty that has plagued the industry restructuring efforts. FERC’s action shows that it will see through to completion the market-based restructuring of the energy industry, while being responsive and flexible. This will help market participants to plan and execute strategies by significantly reducing the amount of regulatory uncertainty that previously existed.”
Rudden is a leading provider of consulting services to the transmission sector of the electric power industry. The complete article can be accessed from Rudden’s web site at www.rjrudden.com. From this home page click on “Profiles” then click on “Papers,” after filling out a brief registration.
R.J. Rudden Financial, LLC:
Asset Financing Could Unlock Value
in Electricity Transmission AssetsCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
New York, New York ... July 30, 2002 ... As the energy market continues to deregulate, some utilities are finding new opportunities in the way that they finance their transmission assets. Gone are the days when such assets were a necessary burden that just drained cash flows for maintenance and expansion. Now, many unbundled electric utilities have sold off their generating assets and are focusing on the new core asset base: transmission and distribution wires.
“If you don’t think about unbundling the liabilities as you are unbundling the assets, you are missing a glorious opportunity to maximize corporate returns and shareholder value,” according to John C. Salomone, author of the R.J. Rudden Financial, LLC article. This opportunity can be realized by using an asset finance model in place of the currently ubiquitous standard model.
Mr. Salomone states contrary to what most investors might think - debt normally associated with electric transmission assets over their 50-year life span is not fixed-rate, amortizing debt. Instead, the 50-year assets are financed with what is essentially a non-amortizing, variable rate payment. Under current market conditions, once generating assets are off the books, from a financial perspective, transmission assets must start meeting the organization’s new investment criteria. Like any other potential new investment under consideration, these assets now become a project with a “threshold” and get analyzed according to the targeted “go, no-go” equity rate of return, not the historic rate of return that was used to finance such assets in the past.
The payoff? “Once one focuses on the ability to use directed cash flows to support transmission asset financing, a range of structural options is available. The cash flow to support asset financing can be completely separate from the Regional Transmission Organization control and the maintenance control in direct contrast to the standard model.” Mr. Salomone elaborates on the variety of other options (tax breaks, etc.) available to all parties (asset owners, ITCs, etc.) by utilizing an asset finance model versus a standard model in the article. The companies’ decisions to retain or transfer ownership of such assets and the results of these hold or sell positions when the asset finance model is utilized are also addressed in the article.
The complete article can be accessed from our web site at www.rjrudden.com. From this home page click on “Profiles” then click on “Papers,” after filling out a brief registration.
R.J.Rudden Associates Survey:
Tremendous Growth In Weather Risk
Financial Derivative Product UtilizationCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... July 17, 2002 ... Based on research and analysis completed recently by R.J. Rudden Associates, Inc. (Rudden), utilization of financial weather risk management instruments in the U.S. energy and public utility sectors are at an all time high.
“Our research demonstrates that despite a broad scale collapse of the energy merchant sector that led in the development of weather-related risk hedging financial instruments in the United States, the demand for the products have increased. We are happy to report that the strength and liquidity of weather-related instruments is very strong,” states Donald L. Sytsma, a co-author of the study and Rudden’s Vice President located in Houston.
The operating earnings and cash flows of U.S. energy and utility companies are highly susceptible to weather conditions. Recent multi-year trends towards warmer than “normal” weather have increased awareness to “volumetric risk,” and are making many regulated electric and natural gas local distribution companies (“LDCs”) take a fresh, hard look at an array of risk management options, both old and new. These include tariff-based weather adjustments to retail rates, weather insurance, reassessment of historical standards to weather normalization in rate cases, and weather-based financial derivative products. Beyond LDCs, the gas-fired merchant and utility generation sectors are examining the effects of weather on both the demand for power, as well as the cost and availability of natural gas as a fuel. Finally, owners and operators of natural gas storage facilities have a vested interest in understanding and managing weather risk.
Rudden provides an overview about what the instruments are, how certain instruments work, and then reports on the results of a survey conducted with approximately 20 marketers, traders, utility CFOs, and Wall Street representatives to explore the reasons behind the growing interests in weather-related hedging strategies and instruments.
The results of the interviews and analysis performed by Rudden are enlightening. “An interesting outcome from the collapse of the energy merchant sector is that in order to maintain equity values, companies throughout the energy industry are placing a high priority on avoiding any type of “surprise” to their shareholders,” states Mr. Sytsma. Rudden expects that this will result in increased attention to identifying and explaining all the business and transaction risks that merchant energy, electric and natural gas LDC companies face, plus will increase their focus on managing components of earnings that contribute to earnings volatility.
The complete article can be accessed from Rudden’s web site at www.rjrudden.com. From this home page click on “Profiles” then click on “Papers” after filling out a brief registration.
Rudden Research: Utility Spending on Distribution is Increasing, but Reliability Remains at Risk
CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, N.Y. (June 26, 2002) - Based on research and analysis completed recently by R. J. Rudden Associates, Inc. (Rudden), the reliability of the nation’s electric distribution systems is likely to be put to the test in the future. Further, expenditures to close the reliability gap will place upward pressure on distribution rates, and attract closer regulatory scrutiny. Rudden’s conclusions are based on a combination of “field analyses,” interviews with distribution engineers and managers, analysis of data from major utilities nationwide, and secondary research that relied on reports and analyses performed by some of the country’s leading research, academic and industry institutions.
“Our research demonstrates that, in recent years, the pace of utility spending on electric distribution operations and maintenance, as well as capital, has exceeded the rate of growth in load and numbers of customers served by a significant degree,” stated Mr. Michael Mount, one of the three co-authors of the report. “This would normally be good news, and it certainly is not bad. Yet, this leaves the impression that everything is OK with the nation’s distribution system. In fact, we feel that a number of factors might be masking true trends in reliability. Further, a number of interviewees suggested that much of the acceleration in expenditures on distribution was much-needed “catch up” investment to compensate for a previous period of severe under-investment.”
Mr. Kevin Harper, another co-author, pointed out that transmission problems have been receiving most of the press recently, and for good reason. “A sound transmission system is the backbone of cost-effective, competitive markets, and the nation needs to get its priorities straight on this matter. However, reliability and power quality…two essential ingredients to a healthy digital economy…are overwhelmingly related to distribution.” With over 90% of power outages caused by distribution, Mr. Harper points to the nation’s distribution system as “more critical to future reliability than either lack of generation reserves or congested transmission systems.” The annual cost of outages has been estimated to be anywhere between approximately $40 billion to $400 billion per year…staggering amounts whichever estimate one uses.”
The report identifies a number of reasons why recent trends in the traditional measures of reliability may not be telling the whole story. “First, as our research shows, while national average trends in reliability measures appear acceptable, the averages mask some challenging conditions in certain parts of the U.S.,” according to Mr. Mount. “In many parts of the country, the lack of severe weather has not stressed the integrity of many systems. Further, reliability statistics themselves do not necessarily reflect the underlying condition and age of a system. However, we do know that the distribution infrastructure is aging rapidly on many systems, especially in many central cities, and that without significant replacements and upgrades, reliability problems could begin to arise. Couple this with transmission and generation related ‘load pockets’ and the problem could become acute.” The report also suggests that the reliability indices themselves are not adequate indicators of the essential quality of power required by the digital economy.
Mr. Harper also indicated that customer dissatisfaction with reliability and power quality is rapidly approaching, if it is not already at, unacceptable levels. “Aside from the anecdotes we have all heard about frustrating momentary outages, there is a body of research that suggests that customers are becoming very concerned over the issue, and are making physical plant decisions accordingly. One survey of national account customers, conducted by the Edison Electric Institute, indicated that about 22% of customers could tolerate outages of no more than five seconds, 39% said they were beginning to make new facility site selection based on reliability, and fully 49% said they were planning future expenditures at their facilities to assure reliability.”
Finally, the authors expressed concern over the implications that their findings have for utility financial performance and regulation. Mr. Richard Rudden, President and CEO of Rudden, observed “With all of the pent up need for improved reliability and power quality, and the accelerating pace of distribution capital expenditures, as well as operating and maintenance expenses, there will be inevitable upward pressure on the rates of ‘wires company’ …or downward pressure on earnings at a time when utilities can ill afford negative analyst coverage. Couple that with customer concerns, and it is no surprise that regulators are placing distribution reliability under increasing scrutiny, and that these issues are finding their way into performance-based rate designs and other regulatory policies and practices.”
The complete article can be accessed from our web site at www.rjrudden.com. From this home page click on “Profiles” then click on “Papers” after filling out a brief registration.
R.J. Rudden Financial, LLC:
Strategy Has a Lot to Do With Utility Stock PerformanceCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
New York, New York ... June 19, 2002 ... “Despite obvious industry turmoil, investors are readily buying up certain kinds of utility stocks, albeit ones that might not have made the radar screen in the recent past,” according to Kyle Rudden, President of R.J. Rudden Financial, LLC. “It is precisely because of the turmoil in the merchant energy sub-sector and the associated weakness in those stocks, that the market has shifted some of its interest to the stocks of companies with a more traditional, regulated business mix. As measured by the Rudden Strategic Position indices, the P/E ratios of competitive non-regulated companies are down an average 14% over the last quarter, while that of a group of more traditional utilities are up 15% during the same period.”
Mr. Rudden’s comments appear in the inaugural issue of R.J. Rudden Financial’s new periodical entitled “Energy Capital Markets.” The Report is part of R.J. Rudden’s effort to provide investors and the industry at large with truly independent research and analysis, born of the firm’s deep energy industry expertise. It focuses exclusively on energy and utility sector financial/capital markets and related issues.
Mr. Rudden’s findings are documented using a new industry measure developed by the firm called, The Rudden Energy Index. A regular feature in the Report, and updated monthly, this broad-based Index tracks more than 70 industry players, and is further segmented into five Strategic Position Indices based on each company’s strategic positioning within the energy industry: Regulated Local Utilities, Regulated Regional Utilities, Diversified-Regulated Bias, Diversified-Competitive Bias, and fully Competitive.
Also included in the premiere issue is a discussion of one of the “hot” issues within the energy industry, impropriety in the energy merchant trading arena; utility stock performance and valuation; mergers and acquisitions (including noteworthy asset sales); securities underwritings (plus material stock buybacks and debt/preferred redemptions); and timely, relevant issues having a direct bearing on the energy capital markets.
Some of this month’s other topics include:
· Is now the time to sit tight, sell or buy in the energy sector?
· Who are the big losers and winners in the sector?
· Mergers and asset sales - Are there true bargains waiting to be acquired?
· “A Balanced Look At Balance Sheets,” an article by Howard Gorman, Vice President of R.J. Rudden Associates, Inc.
· And more …To be added to our electronic distribution list, please send an email, with your name and phone number, to marecco@rjrudden.com.
R.J. Rudden Associates, Inc.:
Strategic Clarity Coupled with Proactive Regulatory Strategy Are Key Drivers For Increasing Public Utility Shareholder ValueCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... June 6, 2002 ... In a presentation conducted at the Energy Association of Pennsylvania’s Annual Conference, Rudden Associate, James P. Bolduc, emphasized that utilities need strategic clarity and regulatory strategy now to boost shareholder value. Mr. Bolduc’s presentation is posted on the Rudden web site at www.rjrudden.com in the section titled Profiles, and then Papers.
Why the renewed focus on fundamentals? According to Mr. Bolduc, previously Executive Vice President & CFO at CTG Corporation, “Many utilities are suffering from a financial Wanderlust. Over the last decade, they have set out in all sorts of strategic directions, often seemingly for the pure excitement of the journey, with no clear destination in mind. Strategic clarity has dissipated, and the financial markets have punished utility stocks accordingly. But now, with attentions turning back to the core utility business, a new and even more powerful risk factor is emerging, an intensified regulatory scrutiny, born of a decade of frustrated market experiments, energy company bankruptcies and arguable abuses of market power. An effective strategy for dealing with this new era of regulation will be a key to utility success in the near future.” Until recently utilities adopted a strategy that kept them out of traditional rate cases which was successful for awhile. Now, that strategy could cost companies quality returns with the energy industry in turmoil.
Another surprise is that “Traditional utilities appear to be just the kind of businesses that will provide the risk-adjusted returns for which investors are clamoring,” stated Bolduc. “Therefore, a sound regulatory strategy, based on an honest assessment of near-term financial condition, is essential if shareholder value is to be maximized.” On the downside, Bolduc warns that Wall Street will have no tolerance for utility managements that lack strategic vision and these same managers better prepare for increased scrutiny about their organization’s fundamentals from rating agencies. Regulators will also ask for more information on strategies, plans, merger synergies and accounting practices.
How does the utility accomplish success in such an environment? “The lynchpin of effective regulatory strategy is a clear corporate vision of the industry end state, an understanding of the company’s role in that environment and a correspondingly aligned strategy.”
R.J. Rudden Associates, Inc.:
RTOs Make Strange Bedfellows - The Interests of Public Power and Investor-Owned Utilities Are ConvergingCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... June 4, 2002 ... Stephen A. Stolze and Matthew C. Cordaro, Ph.D., of R.J. Rudden Associates, Inc. (Rudden) state that, “In the world of Regional Transmission Organization (RTO) development, Public Power and Investor-Owned Utilities (IOUs) are becoming new allies.” Former opponents now find each other often in the same strategic huddle. What is the driver behind this change? FERC’s Regional Transmission Organization (RTO) Development, according to an article that is a follow-up to a survey completed late last year.
IOUs are now confronted with many of the issues that used to be specific to Public Power. Issues such as control, governance and tariffs now align the interests and concerns of both groups as does the advent of open and liquid markets. While not FERC jurisdictional entities, many Public Power entities are actively engaged in the RTO process and are seeking ways to comply with the spirit of FERC Order No. 2000. Examples of this activity are apparent throughout the country. Even federal and cooperative entities such as TVA, BPA and Georgia Transmission Company are working together with IOUs to help create or cooperate with RTOs. A closer look at electric power industry restructuring and the concerns it creates for public power sheds more light on the drivers of the emerging potential for new alliances.
FERC analysis shows that the establishment of RTOs is expected to result in billion dollar annual savings on the cost of wholesale electric power. It is only natural for the purchasers of this power to be eager to extract their proportionate share of value for the benefit of their customers. In a recent update to his paper entitled, “RTO Formation and Development: What Do Stakeholders Really Want?,” Dr. Matt Cordaro stated, “It is clear that future directions in the RTO industry are taking shape more rapidly under Commissioner Pat Wood’s leadership.” In this context, the recent decisions by the FERC on RTO filings are consistent with many of the stakeholder majority opinions, as noted in the results of the original survey conducted by Rudden that is the basis for the paper. The potential for new alignments is especially evident in the critical area of the preference for the independent, not-for-profit RTO/ISO structure over the for-profit Transco model.
A full version of this article and a copy of the associated survey can be found on Rudden’s web site, www.rjrudden.com, under the News Media button, in the Articles section.
R.J. Rudden Associates, Inc.
Survey Shows that Recent FERC Decisions Regarding RTOs and ITCs are Supportive of a Majority of StakeholdersCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... May 20, 2002 ... Dr. Matthew C. Cordaro, of R.J. Rudden Associates, Inc. updated the results of last fall’s RTO Survey at the T&D World Expo 2002 held in Indianapolis. All categories of stakeholders responded to the original survey. This included generators, transmission owners, marketers, distributors, utilities, regulators, large energy users, consultants, attorneys, independent system operators, federal authorities, financial advisors and project developers. For interested parties who do not have a current copy of Rudden’s RTO survey, the results have been compiled into a paper titled “RTO Formation and Development: What Do Stakeholders Really Want?” The paper is available on the Rudden website at www.rjrudden.com in the “Profiles, Our Papers” section.
“It is clear that future directions in the RTO industry are taking shape more rapidly under Commissioner Pat Wood’s leadership,” stated Dr. Cordaro. In this context, the recent decisions by the FERC on the Alliance RTO and TRANSLink filings are consistent with the opinions and preferences of a majority of the stakeholders originally surveyed.
An important affirmation of majority preferences for the independent, not-for-profit RTO/ISO structure over the for-profit Transco model is the major thrust of the FERC decisions. In each of the two cases, the Commission rejected the proposal that a for-profit entity assume a broader scope of authority upon becoming a member of the Midwest ISO. Most revealing of the FERC’s policies and intentions was the requirement in the Alliance Order that Alliance must decide within 30 days whether or not it would join the Midwest RTO or PJM, or join another RTO/ISO.
The decisions also support stakeholder majorities, as expressed in the survey, for divestiture of transmission assets into ITCs, by confirming an ITC’s opportunity to achieve greater returns by filing appropriate requests to the FERC for incentive rates. (An “ITC” is an independent transmission company that owns and operates transmission assets, but does not necessarily assume operational control in the same manner as an RTO/ISO.) One qualification in the FERC orders, however, was a requirement that an ITC consult with the relevant RTO/ISO before making such a rate filing. A question in the survey on ownership issues related to rates also indicated a preference by a majority of stakeholders that transmission owners should be allowed incentive rates.
On the subject of transmission rates and pricing structures, the FERC decisions confirmed a majority preference for license plate rates as a transitional mechanism to average or postage stamp rates. The discussion in the decisions appeared to support the use of postage stamp rates for new facilities. This is consistent with the stakeholder preference indicated in the original survey.
From the discussion in the decisions, it is evident that the FERC will be deciding most of the multi-regional market design and seams issues as part of the standardized market design proceeding. It is also evident that the Commission is leaning heavily toward requiring Locational Marginal Pricing (LMP) for congestion management. The question on this subject in the survey dealt with just congestion rights, so no direct comparison can be made.
Finally the FERC decisions would allow the ITCs to maintain physical control of their assets. This in effect will result in the maintenance of multiple control facilities throughout an RTO such as the Midwest ISO. This decentralization of the physical control function was supported by the stakeholder majority preference reported in the survey for a distributed control, networked systems when the question about physical grid security was posed.
R.J. Rudden Associates, Inc. Announces
The Formation of a New Financial SubsidiaryCONTACT: Kyle P. Rudden 212.332.5055
Hauppauge, New York ... April 9, 2002 ... R.J. Rudden Associates, Inc. (Rudden) announced the formation of R.J. Rudden Financial, LLC (Rudden Financial) and named Kyle P. Rudden as its President. He will report to Mr. J.R. Crespo, Vice Chair of the new company. Rudden Financial will be headquartered at 45 Rockefeller Plaza in New York City. The company has been established to provide independent financial assessments and analyses to the energy and utilities practices of the investment and commercial banking communities. The services offered by Rudden Financial, pending regulatory approval, will complement the services R.J. Rudden Associates presently offers in the areas of strategic planning, project and M&A due diligence, industry economic and financial research and analysis, project and enterprise valuation, financial and technical support of merchant generation and transmission ventures, regulatory research, and risk assessment.
“The Rudden firm has been expanding rapidly as the energy industry restructures, and much of this growth has been driven by our work in the financial due diligence, M&A and regulatory support arenas in both the electric and natural gas industries. The launch of this new affiliate adds an incredible degree of experience, knowledge and sophistication to the financial aspects of Rudden’s overall offering to its clients, and a full understanding of the industry fundamentals that drive value,” stated Mr. Crespo.
Rudden Financial’s President, Kyle Rudden, stated, “I am excited about the opportunity to bridge a critical knowledge gap in a very important and dynamic global industry. With the increasing complexity of today’s global energy marketplace, the need for timely, independent, accurate, and in-depth industry-specific knowledge is more critical than ever in making sound financial decisions. I strongly feel that Rudden Financial’s capabilities, in conjunction with the deep technical knowledge of its affiliates, will prove invaluable to energy company principals and their financial and legal advisors as they navigate change and strive to increase shareholder value. These are exciting times.”
Mr. Rudden was previously Vice President of J.P. Morgan Chase’s Global Utilities Equity Research Group, responsible for directing the firm’s utility analysts and research product worldwide. In this role, he followed numerous domestic and international natural gas and electricity utilities, global independent power producers, and new energy technology companies. During his tenure at J.P. Morgan Chase, he participated as lead analyst in a number of capital markets transactions covering equities (IPO and follow-on offerings), equity-linked derivatives, and fixed income securities (high yield and investment grade). Additionally, Mr. Rudden supported a number of domestic and international utility and energy company mergers and acquisitions, as well as significant asset sales, on both the buy- and sell-sides. Prior to his joining J.P. Morgan in 1993, he was a utility fixed income credit analyst for Fitch IBCA.
R.J. Rudden Associates, Inc.
Announces Litigation and Regulatory Knowledge Management Survey of Energy Industry ProfessionalsCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... April 3, 2002 ... Energy companies are being inundated with the vast volumes of data and documents required to support responses required by increasing activities of federal and state oversight agencies, more intensive investigations by those same agencies and a renewed interest in traditional regulatory proceedings. In this environment, the lack of efficient knowledge management can quickly mushroom into both legal and financial liabilities.
Knowledge management in these legal and regulatory proceedings is often far removed from the day-to-day operations of the enterprise. Compartmentalization makes accessing and assembling the needed information costly and inefficient. It also makes it more difficult to disseminate the knowledge gained from these proceedings within the company, and thereby realize any on-going benefit from the assembled information.
R.J. Rudden Associates, Inc. is inviting energy industry professionals to participate in a survey that seeks to collect data on the issues and methods surrounding Knowledge Management in Litigation and Regulatory arenas. A brief questionnaire that examines how Energy Companies, their Attorneys and their Consultants manage and use the documents and data required in the industry’s plethora of legal and regulatory proceedings has been posted on the Rudden web site. Confidentiality is assured to all participants.
Let us know what you think - www.rjrudden.com and click on Litigation and Regulatory Knowledge Management Survey.
Polling period begins today and extends through April 17, 2002. Final results will be distributed to the respondents.
R.J. Rudden Associates, Inc.
Finds Success, Failure and Lessons
In Natural Gas Retail Choice ProgramsCONTACT: Howard S. Gorman- 631.348.4090, ext: 207
Hauppauge, New York ... April 3, 2002 ... In a study conducted by a Rudden Vice President, Howard S. Gorman, and presented to the AGA’s Rate and Strategic Issues Committee Meeting on March 26; successes, failures and some “Do’s and Don’ts” in natural gas residential choice programs were highlighted. According to Mr. Gorman, residential choice is working well in Ohio, Maryland and Nebraska where meaningful numbers of residential customers participate and marketers are well established. Programs are not doing well in Wisconsin, Massachusetts and New Jersey, where there are only a few participants or marketers, or in Georgia where the program has been disruptive to consumers and marketers. The verdict is still out in New York, Pennsylvania and Illinois. Mr. Gorman’s findings are posted on the Rudden web site at www.rjrudden.com in the section titled Profiles.
What factors lead to successful programs? According to Mr. Gorman, “Some of the ingredients for success are not surprising-actively recruiting marketers, getting all points of view and conducting effective pilot programs.” But some factors are surprising. Mr. Gorman added, “Thinking through the issues is important, but states that focus on the details of planning and do not allow for adjustments are struggling. You need to be able to adapt, especially at this early stage of unbundling. Where gas choice is initiated by the state commission it has an advantage over legislative initiatives-regulation can be changed more easily than legislation.”
Another surprise is that states that have led in electric choice are struggling with gas choice. Not only is there no carryover effect, but relying on success in electric choice instead of having a separate, clearly-defined gas choice program may actually be the cause of disappointing results for gas in Pennsylvania and New Jersey. To succeed, gas choice should be tied to economic or energy policy goals, not pursued for its own sake.
Mr. Gorman also reported that to attract marketers and consumers, “It’s critical to show real commitment to choice. Marketers must expect a reasonable profit before they will invest. Consumers want to know first that marketers are under the supervision of the state commission, but also that the local utility (LDC), whom they trust, supports choice and will be there if the marketer fails. LDCs understand that the commissions are looking to them to fund transition costs, but they want to be assured of recovery.” The last two issues, supplier of last resort obligations and transition costs, are the areas of the most uncertainty in implementing gas choice programs.
How will we know when gas choice can succeed? “When we have marketers operating in several states,” said Mr. Gorman. “Right now only about ten marketers are active in more than two states. When we have a group of marketers that can spread their costs over a large area, increase their purchasing power and diversify their risks, we will have the infrastructure for gas choice to take hold in the states that want it.”
R.J. Rudden Promotes
Michael D. Mount to Vice PresidentCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... December 3, 2001 ... R.J. Rudden Associates, Inc. (Rudden) is pleased to announce the promotion of Michael D. Mount to Vice President. Rudden is a leading management, economic and financial consulting firm specializing in energy industry matters.
Mr. Mount, who has worked with Rudden since July 2001, has more than 19 years experience in the energy, communications, water and related IT industries. Mr. Mount has brought to Rudden his extensive, diverse expertise both as a management consultant and as a Vice President-level energy company executive. In his career, he has directed Balanced Scorecard-based strategy consulting engagements for CEO- and CTO-level officers, varying from an international communications company to an international securities exchange. He has led numerous major energy projects including acquisitions, ERP implementations, a hurricane disaster response, power contract negotiations, process and organizational design, and multiple design and construction efforts. Mr. Mount has also managed departments and teams responsible for business and strategic planning, regulatory strategy, and budgeting.
Mr. Richard J. Rudden, the firm’s President and CEO, voiced his appreciation for having someone with Mr. Mount’s talents being an integral part of the firm. Mr. Rudden stated, “Michael has rapidly demonstrated to our firm and its clients his ability to successfully deliver large, business-critical client engagements. He has also contributed to the enhancement of our Balanced Scorecard-based Rudden Strategic Planning Process. This rapid promotion of Michael is well deserved.” Mr. Mount said, “I am honored to be part of this firm that has such depth of senior-level talent in the energy industry. I look forward to contributing to Rudden’s continued success.”
Prior to joining Rudden, Mr. Mount led the IT and management strategy practice for Renaissance Worldwide, Inc. Before Renaissance, Mr. Mount worked for Citizens Utilities (a diversified electric, gas, water and telecommunications company) in a number of positions including Vice President of Planning for the Energy Sector. Mr. Mount also worked for Hawaiian Electric Company performing system planning studies and managing generation design and construction projects. He has also worked with Allied Signal Corporation directing mechanical design and development projects. Mr. Mount holds a Bachelor of Science degree in Mechanical Engineering from the University of Southern California. He also holds a M.B.A. from the University of Connecticut.
R.J. Rudden Associates, Inc. Releases
Results of RTO Survey of Energy Industry ProfessionalsCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... November 8, 2001 ... R.J. Rudden Associates, Inc. (Rudden) released today the results of its survey of energy industry professionals that explores their opinions on the many rapidly evolving issues associated with RTO formation. The survey targeted a broad cross section of the industry including RTO market participants not necessarily involved in current high profile negotiations.
According to Dr. Matthew Cordaro of Rudden, “The results of the survey in certain ways are not surprising and perhaps predictable. Yet the responses to some of the questions produced some very revealing majority opinions.”
Dr. Cordaro further stated, “Geographically, most of the respondents were from the Northeast, which is understandable when you consider the vintage of the ISO organizations in this part of the country and the nature of the recent FERC mediation process for the region. This may also have some relation to the fact that more than 55% of the respondents chose the independent, not-for-profit operator (RTO/ISO) coming out of the mediation process as the preferred model.”
On the question of transmission asset divestiture, there was a clear preference for retained ownership, either through an ITC or as presently configured. A majority preference was also expressed for allowing transmission owners to implement performance-based rates and to receive incentives for transmission expansion.
Among questions related to pricing structure, there was a strong preference for a hybrid system where some assets are paid for by zone (License Plate) and other assets by aggregation (Postage Stamp). Presuming that a system based on Postage Stamp rates would eventually emerge, the majority felt that 5 years would provide an acceptable transition period. Finally, for the collection of revenue requirements for new construction, the preference was for new assets to be handled through Postage Stamp rates and existing assets phased in.
A majority of respondents agreed that common market rules should be adopted with some allowance for regional conditions. Also, in the question related to balanced schedules, there was a preference shown for letting the market dictate the most appropriate direction on the issue rather than absolutely requiring balanced schedules. In addition, the majority favored requiring all participants to purchase Congestion Rights in an open market.
The final question addressing physical grid security generated a close result between the two options posed. Although a majority favored a distributed control, networked system for RTOs, there was a significant preference also expressed for central control centers with adequate secure back-up.
The full results of this survey are being made available so that all parties can draw their own conclusions. Even though fuel remains for continued debate, the numbers produced by the survey suggest some reasonable consensus in several controversial areas.
Kyle P. Rudden Joins
R.J. Rudden Associates, Inc.CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... November 1, 2001 ... R.J. Rudden Associates, Inc. announced today that Mr. Kyle P. Rudden has joined the firm effective November 1, 2001 as a Vice President. He will be responsible for the further development, expansion and delivery of the firm’s advisory services to the investment and commercial banking industries; clients engaged in mergers and acquisitions; energy project developers, owners and operators; and the firm’s other clients relative to their broader financial services needs. The firm presently offers services in the areas of project and M&A due-diligence, industry economic and financial research and analysis, project and enterprise valuation, financial and technical support of merchant generation and transmission ventures, regulatory research, and risk assessment.
Mr. Rudden joins the firm after nine years in the investment banking and credit rating industries. He was previously Vice President of J.P. Morgan Chase’s Global Utilities Equity Research Group, responsible for directing the firm’s utility analysts and research product worldwide. In this role, he followed numerous domestic and international natural gas and electricity utilities, global independent power producers, and new energy technology companies. During his tenure at J.P. Morgan Chase, he participated as lead analyst in a number of capital markets transactions covering equities (IPO and follow-on offerings), equity-linked derivatives, and fixed income securities (high yield and investment grade). Additionally, Mr. Rudden supported a number of domestic and international utility and energy company mergers and acquisitions, as well as significant asset sales, on both the buy- and sell-sides. Prior to his joining J.P. Morgan in 1993, he was a utility fixed income credit analyst for Fitch IBCA.
“The firm has been expanding rapidly as the energy industry restructures, and much of this growth has been driven by our work in the financial due-diligence, strategic planning and regulatory support arenas in both the electric and natural gas industries,” stated Mr. J.R.Crespo, the firm’s Managing Director and Chief Operating Officer. “Kyle brings to the firm an incredible degree of experience, knowledge and sophistication in these markets, and fully understands the industry fundamentals that drive value.”
Mr. Rudden stated, “I am excited about the opportunity to bridge a critical knowledge gap in a very important and dynamic global industry. With the increasing complexity of today’s global energy marketplace, the need for timely, accurate, in-depth energy industry-specific information and knowledge is more critical than ever in making sound strategic and financial decisions. I strongly feel that R.J. Rudden’s deep operating knowledge, industry expertise, and analytical capabilities will prove invaluable to energy company principals and their financial and legal advisors as they navigate change and strive to increase shareholder value. These are exciting times, and I am looking forward to expanding R.J. Rudden’s capabilities.”
R.J. Rudden Associates, Inc.
Announces RTO Survey of Energy Industry ProfessionalsCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... October 25, 2001 ... Dr. Matthew C. Cordaro at R.J. Rudden Associates, Inc. and former CEO of the Midwest ISO, is inviting energy industry professionals to participate in a survey that seeks to collect and measure opinions on the various issues surrounding RTO formation.
It is clear that future directions in the RTO industry are evolving rapidly. Rudden is conducting this survey to help assist its clients and other stakeholders take the pulse of the industry from a sampling that is broader than just that of active participants in the negotiations.
“The FERC Mediators’ reports have been published and studied for a number of weeks. Participants in the Northeast and Southeast proceedings have presented many common recommendations, and also some significant differences,” stated Dr. Cordaro. “The qualitative opinions of different classes of market participants have been heard and distributed as well. We believe that the time is right to perform a survey of the industry at large to see if a more quantitative view can be constructed.”
Accordingly, Rudden has posted on its web site, a brief questionnaire that examines 11 areas where differences of opinion exist. It is accessible to any energy industry professional who would care to participate. To ensure a base level of understanding, each question is preceded by a brief orientation discussion. In addition to this call for respondents, the survey will also be electronically distributed directly to key players. Confidentiality is assured to all participants.
Let us know what you think - www.rjrudden.com and click on RTO Survey. At the conclusion of the survey, Rudden will make a donation to the appropriate World Trade Center Relief Fund in the name of each respondent.
Polling period begins today and extends through October 30, 2001. Final results will be posted on October 31st. The FERC may issue their rulings by early November. Dr. Cordaro may be reached at 631.348.4090, extension 203 for questions or comments.
Howard S. Gorman
Promoted to Vice PresidentCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... October 1, 2001 ... R.J. Rudden Associates, Inc. (Rudden) is pleased to announce the promotion of Howard S. Gorman to Vice President. Rudden is a leading management, economic and financial consulting firm specializing in energy industry matters.
Mr. Gorman, who has worked with Rudden since 1995, has more than 14 years experience in the energy industry and a total of 20 years of business experience. He has extensive experience in financial and economic analysis and planning; modeling; energy project feasibility; energy asset valuations, acquisitions and divestitures; mergers and related management and organizational matters; information systems; and cost of service for electric and gas. He has supported Rudden’s North American RTO practice, serving clients including PJM, Midwest ISO, American Transmission Company, New York Independent System Operator and The Independent Market Operator (Ontario).
Mr. Richard J. Rudden, the firm’s President and CEO, expressed his pleasure with having someone with Mr. Gorman’s talents being an integral part of our firm. Mr. Rudden stated, “Howard has earned the respect of our clients and peers, and has contributed significantly to the firm’s growth in a variety of areas. His promotion is well deserved.” Mr. Gorman said, “It has been very rewarding professionally to help our clients respond to the changes in the energy industry and, at the same time, to participate in the growth of the firm.”
Mr. Gorman also serves as Rudden’s Chief Financial Officer. Prior to joining Rudden, Mr. Gorman was Controller and Treasurer of Trigen Energy Corporation, the largest U.S. owner and operator of district heating/cooling systems including cogeneration plants. He managed Trigen's capital structure and completed several innovative financings and the company's 1994 IPO on the NYSE.
Before working at Trigen, Mr. Gorman was employed by now Deloitte & Touche and by Coleco Industries, Inc., a consumer leisure products company. He holds a B.S. in accounting from New York University and an M.B.A. from Harvard Business School. Mr. Gorman is a Certified Public Accountant
R.J. Rudden Associates, Inc. States That
Centralization of Control Center Operations
Could Increase Security Risks for the Nation’s
Electric Transmission GridCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... September 21, 2001 ... According to Steve S. Garwood, Vice President of R.J. Rudden Associates, the events of Tuesday, September 11, 2001, demonstrated the vulnerability of U.S. security to unprovoked attacks on our national infrastructure. As we contemplate our vulnerability from such attacks, we should not overlook our electric power system as one such critical infrastructure that, if targeted, could have devastating results. Recent articles have been published that warn of the potential vulnerability of large generating facilities such as nuclear power plants, and major components of the physical transmission system, such as lines, substations and towers; however, another, potentially less obvious component of the electric power system is the information and technology infrastructure necessary to coordinate and control all of the components of our integrated electric power system. This infrastructure is the neurological center of the nation’s electrical grid; and as such is critical to the well being of the entire economy.
Recent Federal Energy Regulatory Commission (“FERC”) initiatives explore the potential for consolidating the management and operations of the U.S. electric power grid into four major Regional Transmission Organizations (“RTOs”), plus Texas and possibly Florida, each controlling the portion of the power grid located within their respective geographic regions. While this consolidation might arguably be essential to the promotion of more efficient power markets, it will need to be implemented in a thoughtful manner that does not jeopardize national security. As FERC pointed out in Order 2000 “The Commission proposed, however, that an RTO would not be required to be a single control area because of concerns over potentially high costs and technical limitations. Instead those proposing an RTO would be given flexibility in determining the best division of functions between the RTO and any providers of other control area functions if there are no other grid operators in its region”.
Mr. Garwood states, “Whatever the wisdom of consolidating the management and/or rules of the transmission system into a handful of regional organizations, the resulting entities should ensure that the positive features of centralization have been balanced against the possible increase in security risks caused by centralization. FERC recognizes this; now NERC (North American Electric Reliability Council) and RTOs should also. This will enhance the likelihood that sufficient dispersion of grid operations with redundant, geographically separated, and overlapping capabilities is maintained; and reduce the risk that operation of the transmission grid is not vulnerable to being disabled by extraordinary, catastrophic events, such as the recent terrorist attacks.”
For more information on this topic, please click on the links below to see the complete text of Mr. Garwood’s article.
Steve S. Garwood
Joins R.J. Rudden Associates, Inc.CONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... August 22, 2001 ... R.J. Rudden Associates, Inc. (Rudden) announced today that Steve S. Garwood has joined the firm as a Vice President. Mr. Garwood joins Rudden from Energy East Corporation where he served as Managing Director, Transmission. R.J. Rudden Associates has established a branch office in Augusta, Maine that Mr. Garwood will manage. Prior to his employment at Energy East, Mr. Garwood had been with Central Maine Power Company for more than 16 years where he had held increasingly responsible positions including Managing Director, Transmission Operations, and Vice President for Maine Electric Power Company, a subsidiary transmission company jointly-owned by Central Maine Power Company and two other Maine Utilities. Mr. Garwood also served as a Director on the Board of Directors for Maine Electric Power Company. Mr. Garwood transferred to Energy East soon after Energy East acquired Central Maine Power Company in September 2000. During his tenure at Central Maine Power and Energy East, Mr. Garwood represented both Companies on the NEPOOL Participants Committee. Mr. Garwood was also an active participant in the restructuring of NEPOOL in late 1996 serving as Vice Chair and Chair of the NEPOOL Transmission Operations Committee in 1997 and 1998, and serving as Expert Witness on behalf of NEPOOL before the Federal Energy Regulatory Commission in the case that established the initial NEPOOL Open Access Transmission Tariff.
“We are very excited to have Steve join the firm,” stated Richard Rudden, President and CEO of Rudden. Mr. Rudden went on to say, “Steve will add significant value, experience and expertise in the areas of strategic planning, utility restructuring, merger and acquisition activities, RTO/ISO development, power plant interconnection agreements, and all areas of the electric transmission business, including cost-of service, pricing, tariff design, as well as merchant transmission. These are areas of growing importance to our clients, particularly given the changes in federal regulatory policies currently impacting the electric industry, and we feel strongly that Steve can provide valuable services in these rapidly emerging areas.” Mr. Garwood stated, “I can’t think of a more exciting time than the present to be working in this industry given the changes impacting the industry stemming from the regulatory reforms coming out of Washington D.C. We are at the experimental stages of developing electric markets, seeing an explosion in merchant power plant development and now, even merchant transmission. Given Rudden’s national recognition for offering unprecedented expertise in all areas of the energy industry, I can’t think of a better team to join forces with than R.J. Rudden Associates to continue my work in the industry.”
R.J. Rudden Associates, Inc.
Calls for Greater Utilization of Natural Gas
Assets to Solve Electric Power Transmission ProblemsCONTACT: Stephen A. Stolze 631.348.4090, ext: 204
Hauppauge, New York ... July 24, 2001 ... Today, in a major announcement Mr. J.R. Crespo, Managing Director and Chief Operating Officer, and Dr. Matthew Cordaro of R.J. Rudden Associates, called upon the power industry to consider greater utilization of gas assets in addressing electric transmission shortcomings. Mr. Crespo noted that there has been a steady decline in the construction of electric transmission capacity over the past decade and that a staggering 55 billion dollars needs to be invested in electric transmission during the remainder of this decade simply to maintain transmission adequacy. Mr. Crespo stated, “Since the RTO formulation process is going slower than anticipated, other alternatives to electric transmission need to be developed. We believe that improved siting of gas generation made possible by greater optimization of gas storage, liquefied natural gas (LNG) and gas pipeline capacity can assist in addressing some of the current deficiencies in the quickly aging national electric transmission system.”
The RTO filings and FERC decisions pursuant to FERC Order No. 2000 have to date placed emphasis on the need to resolve the RTO issues of regional scope and membership, governance, transmission cost allocation and revenue requirements. The focus on what new transmission lines to build, what new transmission technologies to introduce, and how to alleviate congestion has been in the background. Rudden RTO expert, Dr. Matthew Cordaro, notes, “The gap between transmission planning and generation planning has widened at a time of increasing electricity demand and reduced reserve margins. This void needs to be addressed and better utilization of gas assets is one potential avenue of success until the RTO’s get established and begin the job of regional transmission planning.” The Rudden firm, with 20 years of experience in the energy consulting business, believes that use of gas generation supplemented with greater optimization of gas storage, gas pipeline capacity and LNG can assist in addressing some of the current deficiencies in the quickly aging national electric transmission system.
Many utilities and ISO’s have identified where 100 MW to 500 MW units could be built to alleviate transmission congestion. These same entities are currently hamstrung by the inability to get transmission lines sited and the inability to establish RTO’s with sufficient size, scope and suitable private and public membership. “Interstate pipelines may have available capacity that can lead to generation expansion with storage acting as a hedge against both supply and price changes,” Mr. Crespo explained.
Historically, gas storage has been used as pipeline capacity and market area supply and as a vehicle to level out gas purchase contracts. Now greater utilization of gas storage could improve the economics of small gas generation. Mr. Crespo noted that, “There are significant areas of the country where construction and better utilization of gas storage and LNG storage could lead to an improved economic climate for gas generation. For example, stated Dr. Cordaro, “The Northeast has a significantly aged electric transmission system that is beginning to suffer from the absence of capital infusion and difficulties in carrying out transmission planning and receiving regulatory approvals.” Gas has many favorable aspects to help address this current void and debate on electric transmission. To construct additional natural gas pipelines, FERC already has the authority to site the line and back up this action with the power of eminent domain. Traditionally, the site selection process of underground gas transmission projects has gone more smoothly than its electric counterparts. Gas storage helps optimize the supply capability of the pipeline. “While we have traditionally thought of gas storage as being owned by gas utilities or interstate pipelines, it is now time for electric generators to increase their storage capacity and achieve the resulting flexibility on assurance of supply and price,” stated Mr. Crespo.
“Another gas asset that needs to be reviewed is LNG facilities,” observed Mr. Crespo. LNG facilities can be viewed as a supply source or as both a supply source and pipeline capacity for peaking requirements. “However, LNG facilities already strategically located could be a catalyst for the construction of gas generating facilities which could alleviate some of the electric transmission congestion,” stated Mr. Crespo, an experienced energy operations expert.
Mr. Richard Rudden, President of the firm, observed that, “Until there is greater resolution of the open issues regarding the scope, functionality and structure of the RTO industry, effective transmission planning will remain at risk. In the interim, a new focus on the optimal utilization of natural gas assets ... generation, pipeline and storage ... can address at least some of the problems created by the voids in transmission planning.”
In addition, Mr. Rudden stated, “While highly efficient, coal-fired generation has a definite longer-term role to play in meeting the needs of the nation’s integrated grid, it is a more capital-intensive solution, requiring a longer lead time. Natural gas can fill capacity needs much sooner.”
R.J. Rudden Associates, Inc.
Calls for a Strict Economic Discipline in the
Implementation of FERC Orders to Consolidate RTOsCONTACT: Dr. Matthew C. Cordaro 317.431.3873
Hauppauge, New York ... July 13, 2001 ... Dr. Matthew C. Cordaro, Vice President at R.J. Rudden Associates, Inc. and former CEO of the Midwest ISO, has called for a balanced approach to the implementation of the mediation process ordered by FERC this past Wednesday, including a responsible cost-benefit discipline.
The two Draft Orders Initiating Mediation (FERC Dockets RT01-99-000 and RT01-100-000) affect transmission organizations in the Northeast and Southeast regions of the country, and require FERC mediated discussions intended to merge existing ISO into broader regional ISOs.
Dr. Cordaro stated, “The Draft Orders signal a new initiative on the part of the FERC to lead the industry through restructuring and deregulation. However, the mediation process required by the Orders, as well as the resulting reports by the Administrative Law Judges, will need to balance the FERC’s desire for new and accelerated approaches with the infrastructures and processes that are already established or evolving at a number of the existing ISOs. In moving ahead more assertively with industry restructuring, we do not want to throw the baby out with the bath water.”
Dr. Cordaro continued by saying that, “As California has painfully demonstrated, plans to restructure the power industry need to be well reasoned, and driven by market forces and responsible cost-benefit economics, and be as devoid of politics as is possible in a deregulating industry. We strongly recommend the application of stringent economic and operating disciplines to the FERC’s considerations.”
In addition, Rudden Managing Consultant, Howard Gorman, who has worked with several RTOs on financial and rate matters, observed, “While there is a fair amount of near-term uncertainty over FERC’s accelerated mediation approach and outcome, the potential longer-term objective needs to be to encourage competition. If the FERC can accomplish this, it would become easier to complete transactions and thereby facilitate the development of robust financial markets and long-term electricity-related transactions. Robust financial markets reduce uncertainty because they enable people to plan for the future, and the development of long-term financial markets could dramatically affect competition and prices. As the FERC embarks upon its new course, we strongly recommend careful consideration of the effects that its change in policy will have on financial markets, as well as prices to end-use consumers.”
To assist in the public debate over the FERC mediation orders, Dr. Cordaro and Mr. Gorman have developed brief thought pieces on many of the issues that will arise during the mediation process. To view these pieces, please click on the links below. Dr. Cordaro may be reached at 317.431.3873 for comment, and Mr. Gorman may be reached at 631.348.4090, extension 207.
Dr. Matt Cordaro's Thought Piece - Mr. Howard Gormans Thought Piece
Michael D. Mount
Joins R.J. Rudden Associates, Inc.CONTACT: Stephen A. Stolze (631) 348-4090
Hauppauge, New York ... July 9, 2001 ... R.J. Rudden Associates, Inc. (Rudden) announced today that Michael D. Mount has joined the firm as a Managing Consultant. Mr. Mount joins Rudden from Renaissance Worldwide Inc. where he had been a Practice Leader in the eStrategy Management Consulting Practice. Prior to his employment at Renaissance, Mr. Mount had been with Citizens Communications Company for ten years where he had held increasingly responsible positions including Vice President Planning, Energy Sector, and Project Leader, SAP System Integration Team. Mr. Mount also worked for five years with Hawaiian Electric in positions focused on system planning and power plant engineering and construction.
“We are very excited to have Michael join the firm,” states Richard Rudden, President and CEO of Rudden. “He will add significant value, experience and expertise in the areas of strategic planning, technology and IT implementation. These are areas of growing importance to our clients, and we feel strongly that Michael can provide valuable services in these rapidly emerging areas.” Mr. Mount stated, “I have witnessed Rudden’s performance for many years and have a high regard for their excellent work and reputation in the industry. I am delighted to be joining such a prestigious firm at a time when the need for consulting services based on in-depth industry expertise is greater than ever. I look forward to working with the many thought leaders on the Rudden team.”
Mr. Mount holds a B.S. degree in Mechanical Engineering from the University of Southern California and an M.B.A. in Finance from the University of Connecticut.
R.J. Rudden Associates, Inc.
Launches New Corporate Identity and Web SiteCONTACT: Stephen A. Stolze (631) 348-4090
Hauppauge, New York ... June 11, 2001 ... R.J. Rudden Associates, Inc. (Rudden) announced today that it has completed a redesign of its corporate identity including a new logo and web site. The redesign initiative coincides with the firm’s 20th anniversary year. For a color rendition of the new logo, go to www.rjrudden.com.
The new Rudden logo leverages the heritage strengths of the R.J. Rudden Associates brand name, linking them to a contemporary mark that strongly communicates the firm’s strategic attributes. The logo mark combines two celestial shapes - the crescent and sphere. The crescent is symbolic of rebirth, growth and achievement - as with the crescent moon, building to a crescendo, and reaching the crest. The sphere is symbolic of knowledge, influence, and energy - the universe, global impact, the sun's energy. These two symbolic shapes combine to form a stylized comet, itself a celestial shape symbolic of motion, energy and strength. In total, the Rudden logo communicates the strategic attributes of a heritage name, growth, achievement, knowledge, influence, energy and strength.
The redesigned web site contains a comprehensive array of up-to-date information that includes professional profiles for consultants, detailed descriptions of the market segments served by Rudden, and descriptions of past projects organized by practice area. The site also includes postings of articles and white papers written by Rudden’s professional staff and information relating to Rudden’s electric and gas cost-of-service models. Other features that energy industry professionals will find useful are accessed through the eBusiness Directory and Energy Links sections. These two sections will streamline online searches for energy-related information.
“The new identity reflects Rudden's position as a premier strategic, economic and management consulting firm specializing in energy matters,” said Steve Stolze, Chief Marketing Officer. “Throughout our history, Rudden has assisted clients in such mission-critical areas as: economic and financial analysis; strategic, management and marketing services; industry restructuring support; litigation and regulatory support; technical analysis; and implementation support. We look forward to building upon the foundation of quality service and value represented by the Rudden brand.”
R.J. Rudden Associates, Inc., Completes Transaction
With H&H Energy Consultants to Establish Houston OfficeCONTACT: Stephen A. Stolze (631) 348-4090
Hauppauge, New York ... May 9, 2001 ... R.J. Rudden Associates, Inc. (Rudden) announced today that it has completed a transaction that will result in Messrs. Ronald Hrehor and Donald Sytsma, two founding partners of H&H Energy Consulting, joining the firm as Vice Presidents. H&H Energy, a Houston-based consulting firm, specialized in upstream natural gas and trading-related services.
“Our roster of clients located in the Houston area continues to grow,” states Richard Rudden, President and CEO. “The addition of Ron’s and Don’s expertise, experience and industry contacts add immeasurably to Rudden’s ability to provide enhanced service to our existing and new clients, and further expands our capabilities within the upstream natural gas industry, including the production, gathering, pipeline and storage sectors. With the acquisition of H&H’s skills, we have also expanded our service offerings in project feasibility analysis, energy trading and overseas energy consulting. A Houston location is a critical component in our firm’s growth strategy. We fully expect to be adding to our Houston-based activity in the near future.”
Mr. Ron Hrehor stated, “The name Rudden is well known in the energy market. I am excited at the prospect of being at the center of the firm’s move into Houston, and look forward to the future as a key member of the Rudden team.”
Mr. Don Sytsma stated, “The pace of change in the energy industry continues to accelerate. Joining Rudden at this dynamic time greatly contributes to our ability to provide industry leadership. I am certain that all of the firm’s clients will benefit greatly from this transaction.”
R.J. Rudden Associates, Inc. Relocates Washington Office into Downtown DC.
CONTACT: Stephen A. Stolze (631) 348-4090
Hauppauge, New York ... May 30, 2001 ... R.J. Rudden Associates, Inc. (Rudden) announced
today that it has relocated its Washington office to downtown Washington DC. The firm’s new
address is:
“Our firm and its Litigation and Regulatory Support Practice has been growing rapidly,” states Richard Rudden, President and CEO of Rudden. “This new location will be more convenient for our clients, many of whom have offices or do significant levels of business in the area. Further, the new location is in the center of an outstanding talent pool, which will greatly enhance the Company’s ability to continue its growth. We fully expect to be adding to our Washington presence in the near future.”
Mr. Chris Turner, Vice President and consultant at Rudden stated, “Washington DC has always been a focal point for legislative and regulatory activity in the energy industry. With today’s heightened concerns surrounding energy matters it is important to be located nearer the center of activity.”
Alan C. Heintz
Joins R.J. Rudden Associates, Inc.
CONTACT: Stephen A. Stolze (631) 348-4090
Hauppauge, New York ... November 6, 2000 ... R.J. Rudden Associates, Inc. (Rudden) announced today that Alan C. Heintz has joined the firm as a Vice President. Mr. Heintz will be working at the Company’s Washington, D.C. area office. Rudden is a leading management, economic and financial consulting firm specializing in energy industry matters.
Mr. Heintz has more than 15 years of experience both as a consultant and at the Federal Energy Regulatory Commission (FERC). He was previously a Vice President at Stone & Webster Management Consultants. Prior to joining Stone & Webster, Mr. Heintz had held various positions at FERC culminating in his role as Section Chief-Electric Rate Filings Branch where he served the agency in matters relative to Transmission Access and Pricing, Requirements Service, and Non-traditional Ratemaking among others. At Stone & Webster, Mr. Heintz assisted numerous utilities in cutting-edge issues related to Transmission Access, Strategy, and Pricing Restructuring.
Richard Rudden, President and CEO of the Company, states, "Mr. Heintz is a valuable and great addition to our organization. He is a highly respected professional with extensive expertise in current and emerging issues affecting the electric industry. He will be an outstanding resource to our clients." Mr. Heintz will concentrate on matters related to FERC and will lend his expertise to Rudden’s rapidly growing ISO, RTO, Restructuring, and Strategic Planning practices.
Mr. Heintz stated, "I look forward to becoming part of the Rudden organization and expanding an already vibrant and dynamic utility practice. Rudden’s success in assisting many FERC-regulated energy companies in developing new industry strategies was very attractive to me. I am also excited about playing a role in creating a greater presence for the Firm in the Washington, D.C. area."
Robert L. O’Brien
Joins R.J. Rudden Associates, Inc.
CONTACT: Richard J. Rudden (631) 348-4090
Hauppauge, New York ... January 17, 2000 ... R.J. Rudden Associates, Inc. (Rudden) announced today that Robert L. O'Brien has joined the firm as a Vice President. Mr. O'Brien will be working through the company’s Hauppauge, New York headquarters office. Rudden is a leading management, economic and financial consulting firm specializing in energy industry matters.
Richard Rudden, President and CEO of the Company, stated, "We are very excited about the experience and professional track record that Bob brings to the firm. His expertise in a wide array of management, M&A, finance, accounting, information systems, contractual and regulatory matters will further expand the depth and breadth of the services we provide to our clients. Bob has been involved in a number of mergers and acquisitions, organization restructurings and asset divestitures throughout the country."
Mr. Rudden further stated that "we continue to grow rapidly as both old and new clients call on us to assist in matters as diverse as industry restructuring, eCommerce strategies, strategic and business planning, regulation and pricing, general industry economics, expert testimony, asset valuations and mergers and acquisitions. Bob has had experience in virtually all of these areas. His addition to our firm further underscores our commitment to provide our clients with the most experienced professionals available in the industry."
Prior to joining Rudden, Bob was Vice President, Strategic Planning and Regulatory Affairs at Citizens Utilities Company, where, during his 25 years with Citizens, he had varied responsibilities for electricity, natural gas, communications, water and wastewater operations. He has provided expert testimony in more than 200 proceedings in numerous states on all aspects of utility operations, including regulatory approvals of utility acquisitions, the litigation of acquisition issues, general rate cases, pass through clauses, changes in federal and state tax laws, deregulation issues for electric and telecommunications, and disaster recovery programs. He also provided direction and assisted in the design, development and implementation of accounting and information systems within both utility and non-utility business environments.
Mr. O'Brien stated, "Rudden's client base comprises a variety of large and small businesses, both utility and non-utility, who have engaged Rudden to help them make smart decisions in the midst of all of the changes that are occurring in the energy industry. They need both strategic direction and the ability to actually implement plans and programs that work. My background, combined with Rudden's existing capabilities, will provide those clients with considerable value."
Mr. O'Brien holds a Bachelor of Business Administration Degree from the University of Cincinnati and is a Certified Public Accountant.
Rudden Elects Stephen A. Stolze
Vice President, Business Development
CONTACT: Diana Tabacco-Peterson (631) 348-4090
Hauppauge, New York ... December 13, 1999 ... R.J. Rudden Associates, Inc. (Rudden) announced today that Mr. Stephen A. Stolze has been elected Vice President, Business Development. Mr. Stolze will be responsible for the firm's new business development and marketing activities, as well as for special projects. He will continue to provide strategic business planning, brand development, marketing, and communications consulting services to the Company's broad base of energy and affiliated industry clients.
Mr. Stolze has more than 20 years of experience in the energy, technology and related industries. He has managed a number of large, complex projects in which he assisted many energy and other types of companies re-engineer their processes in response to industry restructuring. Mr. Stolze has recently been involved in significant strategic, organizational, communications and regulatory projects for PJM, Midwest ISO, MAPPCOR, Southern Energy, and Wisvest Connecticut. In addition, he has provided marketing and communications services to such energy clients as the New York ISO, EnergyOne, EPRI, the Long Island Power Authority, and many more.
"Steve will further develop Rudden's rapidly growing strategic marketing, brand development, communications, eCommerce and general management consulting practice," stated Richard Rudden, President and CEO. "The changes that are occurring in the energy industry clearly require our clients to focus more of their attention on these areas. Steve's capabilities and Rudden's established expertise will further enable our clients to meet these requirements profitably and effectively."
"As the energy industry moves forward with deregulation, the process of developing and implementing business and strategic plans will be arduous. The Rudden organization is uniquely well qualified to assist its clients in these areas," Mr. Stolze stated. "Rudden is a heritage brand in the energy sector. I look forward to building upon the firm's established tradition of excellence."
Prior to joining Rudden, Mr. Stolze designed and implemented integrated business and strategic marketing, research and communications programs for Fortune 500 companies within markets and industries undergoing dynamic, structural change. His experience includes working with machine tool manufactures as CADCAM was introduced, the introduction of desktop publishing, the introduction of microprocessor control to the vertical transportation industry, the introduction of color_computerized scoring and back office operations to the bowling industry, and the introduction of portable, bar code based data collectio