Power's Surge

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Generators like Calpine and Duke Energy (whose stock is up more than 20% this year) that sell their power to providers outside their home base are favorites. Peco and Louisiana-based Entergy, the nation's third largest power producer, have even embraced the once imploding field of nuclear energy, seizing on it as a lucrative way to produce power for the spot market. "Nuclear was viewed as an albatross--you just tried to survive it," says J. Wayne Leonard, CEO of Entergy. Leonard is spending $4.5 billion buying up nuclear plants at garage-sale prices. So far, his strategy seems to be working. The company is growing 10% a year. Its trading business, while accounting for 25% of its $10 billion in revenue, makes up half of earnings.

The warm reception on Wall Street could quickly cool if, as AG Edwards analyst Tim Winter quips, "the bureaucrats come back to make sure utilities can't make any money." Those aren't idle fears. The regulation-averse, Republican-led Senate just passed legislation to create an industry-oversight committee--this isn't an election year, is it?--to handle disputes and ensure the reliability of electricity nationwide. More ominous, in California the outcry has been so intense that utility officials recently lowered the price cap on rates that generators can charge on the open market. While that may help ease pricing pressure in the near term, it could easily backfire. Says Stephen Baum, vice chairman of Sempra Energy, parent company of SDG&E: "This would simply create a shortage. Those generators might just sell their energy elsewhere." If that happens, Mike Hawkins and lots of other Californians might not have any electricity bills at all to worry about.

--With reporting by Jay Branegan/Washington, Paul Krueger/San Diego, Stacie Stukin/Los Angeles and Daniel Terdiman/San Francisco