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1994--The Year in Review

Fortnightly Magazine - January 1 1995

the same high standards to adequately protect ratepayers, the UTC said. It intends to investigate the "interaction" of least-cost planning with competitive bidding and prudence reviews, as well as whether performance-based ratemaking is appropriate under the new market conditions. Washington Utils. & Transp. Comm'n v. Puget Sound P&L Co., 156 PUR4th 297, Dkt. No. UE-920433, et al., Sept. 27, 1994 (Wash.U.T.C.).

Central Maine Power Co. agreed to a one-time write-off of $5 million in fuel costs to settle a long-running dispute over its management of two purchased-power contracts. The Maine PUC found the utility imprudent and ordered a 50-basis-point equity-return penalty, which it implemented in a subsequent rate case. The company won a stay before the state supreme court by challenging the penalty. To settle the dispute, the PUC allowed the utility to write off the $5 million in fuel costs. In return, the utility agreed to a cap on future purchased-power disallowances to prevent its 1995 return on equity from falling below 6.8 percent. Re Cent. Maine Pwr. Co., 152 PUR4th 316 (Me.P.U.C.1994).

The Florida Public Service Commission (PSC) directed Tampa Electric Co. to cease constructing transmission facilities to serve two municipalities that were formerly full-requirements wholesale customers of Florida Power Corp. The PSC set aside claims that it lacked jurisdiction to disturb the terms and conditions of a wholesale power agreement. Citing section 366.04(5) of the Florida statutes, commonly known as "The Grid Bill," the PSC claimed authority to assure efficient operation of the state's energy grid and prevent further duplication of transmission and distribution facilities. The PSC found the transmission line uneconomic and duplicative of existing facilities because revenues for the power sales did not outweigh the project cost. It also found that subsidy of the construction by Tampa Electric ratepayers and the loss of wholesale and wheeling revenues to Florida Power would offset any savings to ratepayers in the two cities. Re Florida Pwr. Corp., 152 PUR4th 398 (Fla.P.S.C.1994).

Though technically farther along in its transformation to a competitive marketplace, the gas industry also faces continued regulation. The Massachusetts Department of Public Utilities (DPU) changed its review standard for gas purchasing decisions from the current "net benefit to ratepayers test" to a broader cost-benefit analysis of market offerings available to a local distribution company (LDC) when it makes new supply arrangements. The DPU cautioned that, unlike electric utility power-purchase contracts, gas-supply contracts require detailed management by the LDC. It said that approval of a contract would not guarantee rate recovery in the face of imprudent management. Re Berkshire Gas Co. et al., D.P.U. 93-187 et al., Jan. 19, 1994 (Mass.D.P.U.).

The Washington UTC has directed Northwest Natural Gas Co. to upgrade its least-cost plan to incorporate several developments, including: 1) new gas-fired electric generation, 2) the effect of industrial and transportation-only load on future demand,

3) the possibility of acquiring and selling released pipeline capacity, 4) storage alternatives as a supply-side option, and 5) demand-side management for firm industrial customers. The UTC said it would address the prudence of the utility's resource acquisitions only during ratemaking proceedings. Re