By Michael T. Burr
As President-elect Obama’s cabinet takes shape, rumors are percolating about the person he’ll select for secretary of energy. What’s particularly notable from these rumors is that nobody seems to agree about the shortlist (see below).

This raises an interesting question: Why are so many people still considered candidates for this position? Is it because, as Energy Daily Editor George Lobsenz suggested in a November 25 column, DOE is a less important agency than, say, the departments of state or treasury, and therefore the Obama team hasn’t prioritized choosing a DOE secretary? Or is it just the opposite, and the Obama administration is planning a novel approach to the whole energy-policy arena?

“I’ve heard talk of creating a centralized energy counsel or energy czar position,” said Donna Attanasio, a partner with White & Case in Washington, D.C. “The Obama administration will need that in order to coordinate energy policy between different agencies, such as EPA, FERC and the CFTC.”

An energy czar might incorporate the climate czar position that former Vice President Al Gore reportedly declined in mid-November — or it might not. The energy czar probably would lead a new Energy Security Council, similar to the one proposed in a white paper written by John Podesta, leader of Obama’s transition team and former chief of staff for President Bill Clinton. Some sources consider Podesta a possible candidate for energy czar.

Additionally, DOE itself might be in for a major restructuring. One policy analyst – speaking on condition of anonymity – told Fortnightly, “Historically DOE hasn’t been at the heart of energy policy development. Dick Cheney drove energy policy in the Bush administration, and DOE today is primarily a nuclear-waste cleanup organization. If Obama wants the energy secretary to lead energy policy, then DOE needs to be transformed.”

What such a transformation might entail depends on many factors—perhaps most of all whom the president-elect will pick for DOE secretary and the prospective energy and climate czar(s).

With that in mind, and based on conversations with numerous policy analysts, Fortnightly has assembled its own (long) shortlist of candidates for DOE secretary and energy/climate czar. In the following alphabetical list, we’ve put an asterisk (*) by the candidates that seem the most plausible for DOE secretary, and two asterisks (**) by the names most likely to be named energy/climate czar.

Who will get the nod? Nobody knows, but if forced to predict, I’d guess the president-elect will pick Phil Sharp for DOE Secretary, and Jason Grumet will lead the Energy Security Council at its inception, turning it over to Arnold Schwarzenegger when his term as governor expires. That’s just a guess.

- *Jeff Bingaman, senator (D-N.M., chairman of Senate Energy Committee)
- *Rick Boucher, congressman (D-Va, chairman of House Energy & Air Quality subcommittee)
- **Carol Browner, former EPA chief in the Clinton administration, now principal in the Albright Group
- Chet Edwards, congressman (D-Texas, chairman of Defense Appropriations Committee)
- Nancy Floyd, founder and managing director of investment firm Nth Power
- Dick Gephardt, former congressman (D-Mo.)
- **Al Gore, former vice president and Nobel prize winner for his climate-change advocacy efforts (reportedly declined “climate czar” position)
- **Jason Grumet, a key energy adviser to Obama and executive director of the National Commission on Energy Policy
- Chuck Hagel, senator (R-Neb.)
- Jeff Immelt, CEO, General Electric
- Jay Inslee, congressman (D-Wash., member of House Energy & Commerce Committee)
- John Krenicki, president & CEO, GE Energy
- Jonathan Lash, president, World Resources Institute
- *Ed Markey, U.S. congressman (D-Mass., chairman of the House Select Committee on Energy Independence and Global Warming)
- **Kathleen McGinty, former Pennsylvania environmental secretary and former chairman of the Council on Environmental Quality in the Clinton administration; reportedly a top candidate for EPA secretary
- *Ernest Moniz, professor of physics, Massachusetts Institute of Technology, and former undersecretary in Clinton DOE
- Janet Napolitano, governor (D-Az.)—reportedly selected to head Department of Homeland Security
- Sam Nunn, former senator (D-Ga.)
- **John Podesta, Obama’s transition team leader and former chief of staff in Clinton administration
- *Dan Reicher, former assistant energy secretary in the Clinton administration, and now director of Google.org’s climate change and energy initiatives
- *Ed Rendell, governor (D-Pa.)
- Bill Richardson, governor (D-N.M.) and former DOE secretary in the Clinton administration—reportedly the top candidate to become Obama’s commerce secretary
- Bill Ritter, governor (D-Colo.)
- James Rogers, CEO, Duke Energy
- John Rowe, CEO, Exelon
- *Kathleen Sebelius, governor (D-Kansas)

- *Phil Sharp, former senator (D-Ind.) and now president of think tank Resources for the Future

- **Arnold Schwarzenegger, governor (R-Calif.)

- Fred Smith, CEO, Federal Express

- James Woolsey, former CIA director in the Clinton administration and energy adviser to Sen. John McCain during his presidential campaign

Posted: November 26th, 2008 under 2008 elections, DOE, Uncategorized, energy czar, energy policy, regulation.
Comments: 1

-Mark T. Williams, Boston University Finance & Economics Department

For several decades, the top four U.S. independent investment banks—Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers—have been instrumental to the growth of America’s power and gas utility industry. With the sudden shotgun marriage of Merrill Lynch, the bankruptcy of Lehman, and the transformation of Goldman Sachs and Morgan Stanley into bank holding companies, the investment banks are now history.

Additionally, Wall Street investment banking has been consolidated rapidly with “the Big Three” commercial banks—Barclays PLC, Bank of America and J.P. Morgan—taking advantage of bottom-feeding opportunities.

This dramatic reshaping of Wall Street has come too swiftly to fully comprehend, yet it will have an immediate and lasting impact on the utility sector.

With immediate job losses among investment bankers, a decline in their ranks will reduce competition for underwriting utility bond deals. Less competition will equate to higher fees. This might not be immediately visible in a weak economy, but it will show up as the economy eventually rebounds.

Significant investment banking consolidation and downsizing will result in a loss of institutional knowledge as older experienced investment bankers are forced to take severances.

Having a banker who knows the history of the utility, and the company’s management and its level of corporate risk-taking, can be invaluable when structuring and underwriting bonds, as well as providing M&A guidance. Utilities will need to begin building new relationships.

The recent market crisis, including the bankruptcy of Lehman, has resulted in significant market uncertainty. The proposed $700 billion Treasury Department bailout has raised additional concerns about how such a plan will be funded. Such events have placed increased pressure on interest rates, raising the cost of both short-term and long-term capital. In addition, as more of the investment banking business falls in the hands of fewer commercial banks, it remains uncertain whether utilities can count on the same level of service they enjoyed previously. The corporate cultures of investment and commercial banking can be quite different, and Wall Street’s reshaping might result in customers losing out.

Prior to the weekend shotgun wedding with Merrill Lynch, Bank of America CEO Kenneth Lewis was less than enthusiastic about how investment banking activities might fit inside his institution. Moreover, it’s unclear whether these banks will view serving the gas and power utility industry as a strategic priority. For example, although Barclays is buying Lehman’s defunct investment bank, the European bank reportedly hasn’t decided which divisions it would keep and build a franchise around.

In the weeks and months ahead, one trend to watch closely is whether the investment bankers who are able to find new homes will be randomly scattered around Wall Street, or whether the Big Three banks will make it a priority to keep these utility teams intact.

Now that the Big Three hold more of the cards, they should reach out to the utility industry and pronounce their intentions. What will be their level of commitment? Will they devote the capital needed to adequately service this industry? We might be in a recession, but the market will recover eventually, and the utility industry will continue to grow and prosper. Having a knowledgeable investment banker ready, able and willing to underwrite or structure a merger will be crucial.

So the message to Barclays, Bank of America and the other institutions that may be the future home to our power and utility industry investment bankers: Whatever you do, be good to them, as they are an endangered species, and vital to this industry’s future.

Editor’s note: Williams previously was a senior vice president of Citizens Power LLC, a Boston based energy trading company, and a vice president with Edison Mission Energy. Prior to that worked at the Federal Reserve Bank as a full examiner.

Posted: September 24th, 2008 under Uncategorized, bear market, credit crunch, finance crisis, investment banks, recession, subprime lending.
Comments: none