New Kellerman venture targets regulated utilities

OREANDA-NEWS. May 18, 2015. Power industry innovator Larry Kellerman, who has spent more than two decades buying and operating merchant power plants across the country, is going old-school with his latest venture which involves raising funds to acquire traditional electric utilities.

Kellerman's latest start-up venture, Twenty-First Century Utilities LLC, brings him full circle to his early industry roots when he worked for regulated utilities Portland General Electric and Southern California Edison in the 1980s.

As the company name implies, Kellerman said his goal is to advance the 100-year-old utility business model to better serve customers of the future.

"We are just starting up, raising capital," Kellerman said. "We want to buy one or two regulated utilities."

While natural gas prices can be more economical than coal at current prices, Kellerman told attendees at the Argus US Natural Gas Markets conference yesterday that utilities remain wary of relying on gas as a long-term fuel source because of historic price volatility and a regulatory model that rewards capital investment over operating expenditures.

Kellerman urged gas producers to work creatively with electric utilities, such as NextEra's Florida Power & Light, Duke Energy and Entergy, as they seek to buy long-term gas reserves and capitalize the costs so that they can be recovered through rate-based mechanisms.

"These guys get it, that buying long-term reserves or having significant pre-pays for fixed quantities of gas going forward is a very good deal," Kellerman said.

Kellerman said Twenty-First Century Utilities will target small to moderate-sized utilities, preferably vertically integrated utilities in progressive markets.

"We are looking to deploy capital to make utilities more customer-friendly (by) embracing new technology tools that allow us to be more impactful for customers on the other side of the meter," he said.

Kellerman has held senior management positions at Goldman Sachs' Cogentrix power asset business and El Paso Corp. Since leaving Goldman in 2010, Kellerman has served as chief executive officer of Quantum Utility Generation, a unit of private equity firm Quantum Energy Partners, which has bought and sold conventional and renewable energy projects.