Been a while since I looked at the sector. Like all commodities prices charged for electricity are set at the margin. A small change in supply/demand can have a big impact. It's been a while since I looked, but I don't think the supply/demand situation is tight yet. If/when the economy corrects demand should fall just enough to really hurt margins at many of these co's. I think you're more of a ST trader so these points are probably moot. I may look at AES if I have more time, but more than likely I'll just wait for energy and PMs to come to papa.
In terms of AES I'd look at when their debt comes due (any due in '06 or '07?) That's how most of the utils got so cheap. They built out massive supply during the '99-'2000 boom only to see the economy get hit and rates plummet. With RRI and many others the bankers could have closed up shop and fought over the pieces, but there were about 30 banks involved and RRI was profitable. All of RRI's debt was unsecured and most was coming due in '04. I bet that the bankers would deal w/them and won. Many of the of the IPPs/utils has similar stories. Now most of the banks have secured their loans. Not sure where AES falls in w/respect to this, but if you want sleepy FA plays then I suspect RRI or CNP might suit you better, but again I've done no real FA on AES suffice to look at Yahoo and see debt/cash flow/earnings market cap etc.
As for your points lower commodity prices can help, but most of the players set prices accordingly. Many hedge so it varies quite a bit. RRI has done poorly in the past in this regard. Margins are really set based on electric demand (economy) and A/C demand in the summer. A hot summer can have a big impact for some of these plays.
As for the legislation I haven't followed in a while so can't really comment, but to say there aren't too many players that are flush w/cash that can go on a shopping spree. As you've seen Buffet is one, but they are few and far between.
We have similar investing styles. I tend to leverage smaller "sure thing" type moves though it's been a few years since I've used margin.
