America's Biggest Utility Sees Blackouts Ahead
Oil Prices Surge 8% After Trump Reimposes Iran Blockade Leonard S.
Hyman is an economist and financial analyst specializing in the energy sector.
He headed utility equity research at a major brokerage house and… The CEO of America’s largest utility, EXELON, foresees blackouts in the US in 2027.
To boost power supply Calvin Butler wants states to allow his utility to build new power plants.
Opponents will object, saying this would saddle utility consumers with the risks.
Meanwhile, we are scratching our heads because economists have long theorized that utilities build excess rate base in order to raise earnings.
We would amend this to argue that utility managers only deploy excess capital when they can earn more than their cost of capital (would you invest to earn 8% if you had to pay 10% for the borrowed money?), and we are absolutely convinced that utilities have been earning more than cost of capital for decades.
In other words, they should be over- investing like crazy in facilities that would prevent things like electricity blackouts.
Back before COVID we presented a paper saying that the electric industry was underinvesting by close to 50%.
Capital expenditures have risen substantially, but they still look too low.
And if EXELON’s CEO is right, we will know soon enough.
We examined industry investment for 2004-2024, the period following the corporate reorganizations resulting from the restructuring of the industry.
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