Table 1: Summary of selected recent sources documenting the absence of a true market and the lack of adequate market data for small hydroelectric facilities in the Northeast

Source: Management Information Services, Inc., 2005

Year Study/Source Author Major Findings Derived
1997 Article in the Public Utilities Fortnightly, Jeffrey Price Proper valuation is extremely difficult because of the unsettled market a condition that is likely to persist for some time; the information and experience required to develop a coherent view of the market do not exist.
1998 U.S. Generating Company Assessment U.S. Generating Company Market approach is not valid because there are no reliable comparable sales data available. It is not clear whether or to what extent a vibrant, competitive retail market for hydro facilities will actually develop in New England; there are no current data available upon which to measure the value of a hydroelectric facility because both wholesale and retail markets are evolving.
1998 Article published in the Public Utilities Fortnightly Steven Schneider The market is in flux and it is thus difficult to properly assess the value of generating assets. The use of comparable sales data is not legitimate because sales are likely to include the prices for power purchase agreements, stranded cost recovery rights, other intangible contract rights, indemnification for various liabilities, other environmental liabilities, and other assets or costs not directly related to the tangible taxable property.
1998 Analysis prepared by Burak Anderson & Melloni Jon Anderson The market-based comparable sales approach cannot be used for hydroelectric projects because there are so few fair market value sales; the comparable sales approach is useless because there are few, if any, sales. The introduction of competition to the energy supply is unlikely to create a market for transmission and distribution systems, as little change in the regulatory regime is anticipated.
1998 Article in Inside Energy Inside Energy The market for electric generation assets is puzzling, fluid, dynamic, and unsettled and it may take 10 years for the market to be defined. In such an environment, buyers and sellers have few clues as to the actual economic value of generating assets. The Electric Power Supply Association feels that the unsettled market and lack of necessary information is alarming.
1998 Testimony U.S. Generating Company A viable market for hydroelectric facilities in the Northeast does not exist. Valuation is difficult due to issues associated with market uncertainties and the need to forecast and interpret a market that has not yet formed over an extended period of consideration. (emphasis in original testimony)
1999 Valuation of Hydroelectric Facilities Report Vermont Department of Taxes and the Vermont Department of Public Services A true market for small hydroelectric facilities in the Northeast does not exist and adequate market data are lacking. Markets are undergoing a fundamental change, and it will be some time before an accurate picture of market prices will develop. Recent sales of hydroelectric facilities were made under conditions of an administratively fixed standard offer which are below the market price and thus do not represent true market prices.
1999 Article in the Northeast Power Report Northeast Power Report The market for hydroelectric plants is difficult because the hydro plants are being valued very highly. The necessary information is not available because the financial terms of the transactions are not being disclosed.
1999 Hydroelectric Facility Valuations Vermont Hydropower Coalition The market approach to valuing hydro facilities is inappropriate, since it requires the use of (often unattainable) proprietary, highly sensitive information and because the there is no basis to assume that the current unstable electric energy markets will stabilize.
1999 Article in the Public Utilities Fortnightly Bruce Radford A true competitive market for electricity in the Northeast has yet to develop, and current indicators are confusing, counterintuitive, and contradictory; the market in the Northeast is immature.
2000 Winter 1999/ 2000 issue of Real Estate Issues William Kinnard Jr. and Gail Beron A market approach to hydroelectric facility valuation is difficult because an appropriate market does not exist. Few clean sales of the tangible real property and personal property of electricity generating plants have been reported. Nearly all include acquisitions of fuel contracts, power purchase contracts with the selling IOU (some of which are long term, fixed-price contracts), employment guarantees for existing plant personnel, and other intangible, non-reality assets.
2000 Article in Electric Utility Week Electric Utility Week Determining the property tax valuations for electric generation assets is difficult due to the lack of adequate market information; correct evaluations are nearly impossible because there are no other comparable sales.
2000 Article in the Electricity Journal Rajat Deb Deregulation is changing the market for hydroelectric facilities, but it is unclear precisely how or when the new market would emerge. Due to rapidly changing market conditions and lack of information, development of sophisticated modeling and Monte Carlo estimation techniques are recommended.
2002 Appraisal Report Certain Hydroelectric Assets in Moreau, New York MR Valuation Consulting Adequate information does not exist to accurately evaluate comparable sales data relating to hydroelectric facilities, and the sales comparison method is not reliable. Confidentiality provisions and non-full disclosure of sale terms prevent the adjustment of comparable sales to make an adequate comparison. Due to confidentiality provisions and other factors, the sales data to date does not allow for a reliable sales comparison approach.
2002 Article in the Morning Sentinel Colin Hickey Properly valuing a small hydroelectric facility in Maine is difficult due to the lack of adequate market information; confidentially concerns precluded obtaining the necessary financial data.