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PRICE WATERHOUSE SURVEY FINDS CLEAN AIR A PRINCIPAL STRATEGIC ISSUE FOR PUBLIC UTILITIES

 PRICE WATERHOUSE SURVEY FINDS CLEAN AIR A PRINCIPAL STRATEGIC
 ISSUE FOR PUBLIC UTILITIES
 CLEVELAND, Dec. 17 /PRNewswire/ -- A new Price Waterhouse survey found that increasingly complex environmental protection regulations, particularly the Clean Air Act, and accompanying compliance costs are significantly affecting the public utilities industry. The Clean Air Act amendments challenge utilities to comply in ways that minimize the impact on rates while increasing shareholder value, the survey results show.
 "One of the primary factors giving rise to the enhanced environmental awareness in the public utilities industry is the Clean Air Act amendments issued in 1990. These have made environmental matters an even higher priority on the national agenda," said Paul R. Bjorn, Chairman of the Price Waterhouse Public Utilities Industry Services Group. "Of the 100 companies we surveyed, 96 addressed environmental matters such as clean air, ground and water contamination, safe drinking water, waste disposal, and research and remediation."
 "The Public Utility Industry: 1991 Survey of Financial Reporting and Industry Developments," an annual Price Waterhouse survey, is based on an analysis of information presented in the 1990 annual reports of 100 electric, gas and water utilities.
 The primary goal of the Clean Air Act amendments is to reduce sulfur dioxide emissions by 10 million tons per year from 1989 levels and to cap annual sulfur dioxide emissions at 8.9 million tons, on average, by the year 2000. The amendments use emission allowances, the authorization to emit one ton of sulfur dioxide during or after a specified calendar year, to reduce emissions.
 Compliance Strategies
 Utilities are concerned about their sulfur dioxide emissions. The majority of the electric and combination utilities surveyed indicated that they expect to use fuel and/or technology conversions to comply with the amendments. Companies considering fuel conversion discussed a change from high sulfur to low sulfur coal. Others are considering new fuels, such as natural gas. Most companies considering technology conversions said they expect to install "scrubbers," sulfur dioxide control equipment, at coal-fired power stations or will convert to an emerging clean coal technology, such as fluidized bed combustion or combined cycle technologies. Only four percent of the companies surveyed were considering buying additional emissions allowances as a compliance strategy.
 The costs of complying with the Clean Air Act amendments, disclosed by 40 companies surveyed, ranged from $5.1 million to $3.4 billion. More than half of these companies are located in the Northeast and Midwest, which have the highest concentration of coal-fired power plants. Nineteen companies expect to recover from ratepayers additional capital and operating costs resulting from compliance, and six companies said they may recover only part of the costs.
 "A common theme in the annual reports of the gas companies surveyed was the emphasis on natural gas as the 'fuel of choice' for the 1990s," Mr. Bjorn said. "Natural gas is safe environmentally and is abundant in the United States. These factors are considered the primary qualities that will propel the gas industry forward."
 Consolidation and Diversification
 "As in past years, public utilities continue to use consolidation and diversification as strategies to combat regulatory and legislative changes," Mr. Bjorn said. "In the annual reports of the companies surveyed, competition was the factor most commonly identified as the driving force behind the industry consolidation movement. In response to competition, regulators have taken steps toward deregulation, which creates a new environment in the industry. This environment mandates that public utilities be flexible in their strategic planning and provide reliable service."
 Benefits of industry consolidation to customers and shareholders, disclosed by companies surveyed, are:
 -- Efficiencies in power purchasing and operations
 -- Increased reliability of service
 -- Overall reduction in costs due to economies of scale
 -- Increased gas supply diversification
 "The extent of diversification by utilities into nonregulated lines of business continues to increase," said Mr. Bjorn. "More than 70 percent of all companies surveyed were involved in three or more nonregulated business activities. Our survey results indicate that the primary reason for diversifying is to maximize the long-term value of shareholders' investments."
 The Price Waterhouse survey also examines other topics that utilities consider important:
 -- Least-cost planning
 -- Open access transmission of power
 -- Rate case issues
 -- New standards for accounting for income taxes and post-retirement benefits other than pensions
 For further information on these industry issues or the survey, contact Paul Bjorn, Price Waterhouse, BP America Building, 27th Floor, 200 Public Square, Cleveland, Ohio 44114-2301.
 Price Waterhouse is a leading worldwide professional organization of accountants and auditors, tax advisers and management consultants. Through a global network of firms practicing in 460 offices in 111 countries and territories, Price Waterhouse professionals provide advisory services to businesses, individuals, nonprofit organizations, and government entities. The U.S. firm, with 13,000 men and women in 113 U.S. offices, is part of the worldwide organization.
 The Price Waterhouse Public Utilities Industry Services Group offers accounting and auditing, tax and rate, regulatory and management consulting services to public and private electric, gas, telephone, water and wastewater companies.
 -0- 12/17/91
 /CONTACT: Ellen M. Ringel, 212-819-5021, or Paul R. Bjorn, 216-523-3356, both of Price Waterhouse/ CO: Price Waterhouse ST: IN: UTI SU: ECO


SM-OS -- NY016 -- 2918 12/17/91 11:29 EST
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Date:Dec 17, 1991
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