Talk of looming power shortages and brownouts around the country has many people worrying about the problems those circumstances might cause.
But some financial analysts and stock-market investors are also looking into who might stand to benefit, acting on the time-honored Wall Street precept that every crisis contains an opportunity.
The electric power situation hasn't yet reached crisis proportions. But as the Merrill Lynch Market Letter observes in a special report on the subject:
"Supplies of electricity are gradually tightening in many regions, especially in New England, on New York's Long Island and in some mid-Atlantic states.
"The problem reflects unexpectedly strong demand in recent years, operating difficulties that have forced some generating stations out of service, and the reluctance of some local governments to allow completed plants to operate."
A team of analysts at IDS Financial Services, the big Minneapolis-based money-management firm, asserts, "The United States faces the very real threat of a substantial shortage of electricity, on a national scale, by the mid-1990s."
In most industries, an investor's response to such a forecast would be simple--buy stocks of companies that own and produce the commodity or product in question.
Regulators Control Rates
But electric utilities are a special case, since they lack the ability to set their prices simply on the basis of supply-and-demand market forces. The rates they can charge are set by state regulators.
"It's unlikely that many utilities will benefit substantially from higher sales of electricity. Regulatory authorities often make it difficult for companies to keep extra profits," says Merrill Lynch.
Any gain in revenues and profits, IDS says, is likely to occur at a utility that has a large "reserve margin"--capacity to provide extra power at periods of peak demand. Utilities with tight reserve margins would be in a losing, rather than winning, position.
Analysts say the story could be different, however, for other businesses that serve the electric utility industry in a variety of ways.
"The solution to the problem of insufficient power-generating capacity clearly is to build new power plants and transmission facilities," Merrill Lynch says.
"Many utilities have begun to do just that. Some utilities are turning increasingly to comparatively small, gas-fired generating stations that can be put into service relatively quickly."
By IDS's reckoning, "if only half of the new power-plant capacity is gas fired, electric utility demand for natural gas will be 60% higher than it was in 1988."
Overall capital spending by the electric power industry, in decline since the early 1980s, is predicted to begin increasing in the years just ahead.
"That suggests that companies in a number of fields--including engineering and construction, machinery and electrical equipment--stand to benefit in the not-too-distant future," Merrill Lynch says.
"Further out, suppliers of fuel such as natural gas and low-sulfur coal could benefit once new or expanded power plants are in operation."
A special hazard in the search for companies that will prosper serving the power industry arises from the complicated environmental, scientific and political questions involved.
Nevertheless, even assuming a recession or two and no dramatic increase in demand for energy, IDS analysts reckon that "twice as much additional power-plant capacity will be needed by the year 2000 as the electric industry currently estimates."