Electric Utilities: A New Operating Model

The progressive liberalization of the electric utility industry has inspired energy companies to seek new strategic positions on the value chain of power. Traditionally an industry of vertically integrated companies, the boundaries of which were defined by geography and historical accident, the utility sector has undergone a fundamental and comprehensive restructuring in recent years. Regulatory mandate and market discipline have driven the development of intermediate, wholesale markets and new "pure play" business models in transmission, generation (gas, nuclear), trading, and retail services. The market, recognizing that each of these niches offers distinctive growth and risk characteristics, has generally applauded this trend. Indeed, as recently as a year ago, it appeared that the single most important driver of an energy company's market valuation was the strategic position it elected to occupy on the industry's value chain. But that was a year ago....