One difference between regulated and unregulated utility companies is, apparently, that unregulated power suppliers use more sophisticated fuel purchasing strategies than their regulated counterparts. At least that is the message I get from this Platt’s Coal Trader article, “Deregulated utilities may use stocks as bargaining chips“, reporting on a statement made by Arch Coal CEO Steve Leer:
Leer drew a distinction in the way regulated and deregulated utilities may be approaching their coal inventories. He said that the deregulated power generators may be seeking to take advantage of their presently high inventories to force coal producers to lower prices. But he added that he would not expect regulated utilities to be taking such risks; instead, he expects them to follow closely their inventory targets.
“In regulated utilities, when you set the inventory target at 60 days, that becomes the target and you wouldn’t use the inventory numbers to play the market, but the deregulated utility would,” he said, calling the distinction a “subtlety unique to regulated utilities.” Leer spoke at the JP Morgan’s Basics and Industrials conference in New York on June 12.