Re-Focus: annual reports tell a tale of an industry with new priorities. (Dow Jones Utilities).(annual reports for energy industry companies)

No one in the energy industry will forget 2001," writes Chairman John Rowe in the first sentence of Exelon's annual report. Virtually all the other annual reports from the 15 utilities in the Dow Jones Utility Index echo Rowe's sentiment.

The 2001 annual reports are in themselves commentary on the tumultuous times in the energy industry. They note that 2001 began with rolling blackouts in California and ended with the collapse of Enron and its off-balance-sheet shenanigans. The annual reports also reflect on the economic recession and lament the tragedy of September 11.

In the wake of Enron's collapse, more companies discuss vision, values, and character in their annual reports than in previous years. Strategies flowing from the visions are presented. Qualitative objectives flowing from strategies are prominent. Quantifiable goals to measure performance against objectives are explicit and realistic.

The 15 companies included in the index are the largest and most well known utilities in the U.S. (see table 1). Among these are several of the most seriously challenged utilities. Utility industry annual reports can be examined from an end-user point of view for patterns and prospects.

Plain Versus Pretty

This crop of annual reports is relatively plain in appearance. Gone are the glossy reports from AES, Edison, and PG&E. Now, their reports are simple and short. Edison, which is close to bankruptcy, presents a four-page letter. The message from ABS is just one-page long. Rather than following the letters from their chairmen with glossy elaboration, PG&E and Edison present in black and white a more detailed and frank management discussion. AES presents a deliberately expanded Form 10-K.

The effect of plain reports is compelling. Without big pretty pictures, management and readers have to focus on vision, strategies, objectives, goals, policies, and performance. The substance is telling. AES lists and then elaborates on each of its core values or principles of integrity, fairness, fun, and social responsibility. AES summarizes that these principles are pursued "not as a means to achieve economic success but because adherence is a worthwhile goal in and of itself."

Edison lists its values as integrity and high-quality service. Accordingly, Edison reports its 2001 objectives were to stay out of bankruptcy, pay off creditors, and restore reliability and predictability to California's energy market. Chairman Bryson writes: …